Special Education Funding Across States: A Comparative Analysis

Introduction

Ensuring equal access to education for all students, regardless of their abilities, is a fundamental principle of public education. This commitment is particularly critical for students with disabilities, who require specialized services and resources to thrive academically and personally. The Individuals with Disabilities Education Act (IDEA) was enacted to support states in providing these necessary services. However, the distribution of special education funding varies significantly across states, leading to disparities in the resources available to students with disabilities. This article examines the complexities of special education funding, comparing different approaches and highlighting the challenges and opportunities in ensuring equitable access to quality education for all students with disabilities.

The Foundation: IDEA and Federal Funding

The IDEA, since its inception in 1974, authorized federal funding for up to 40% of the average per-pupil spending nationwide. This was intended to cover a portion of the costs associated with providing special education services to students with disabilities. However, federal funding has never reached this target in the decades since the law was enacted. Despite renewed interest in increasing federal appropriations for IDEA, the formula used to allocate these funds to states remains a critical consideration.

IDEA's Funding Formula: A Source of Disparities

The existing formula for distributing IDEA funds has been a subject of concern. Evaluations have revealed that the formula does not equitably distribute federal funding among states, and using it to distribute future increases in IDEA appropriations would perpetuate existing disparities.

In fiscal year 2020, a significant difference in IDEA grant amounts existed between states at the top and bottom of the distribution, amounting to approximately $1,442 per child. For instance, Wyoming received about $2,826 for each child receiving special education, while Nevada received $1,384 per child. These disparities are systematic, with states that have larger shares of children eligible for special education often receiving fewer dollars per child than states with less need. Additionally, large states and states with more children experiencing poverty also receive fewer IDEA dollars per child.

The Impact of Policy Proposals

Simulations of policy proposals, such as a 20% increase in appropriations for IDEA and full funding for IDEA, indicate that increasing IDEA appropriations without modifying the current formula would exacerbate existing disparities. A 20% increase would widen the difference between states with the most and least funding to $1,805 per child. Achieving "full funding" would further increase this difference to $4,331 per child.

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The Shift in Funding Formula in 1997

Disparities among states in federal special education funding emerged after Congress changed IDEA’s funding formula at the law’s 1997 reauthorization. The updated formula consists of two parts: a base funding amount equivalent to what each state received for FY1999, and a population-poverty calculation that allocates all new appropriations above the FY1999 base amount according to states’ relative child population and poverty counts for the prior academic year. The FY1999 base became a static fixed amount that states receive each year rather than an amount that is recalibrated annually according to cross-state differences in need.

In the years immediately following the formula change, there weren’t significant federal IDEA appropriations beyond states’ FY1999 base funding amount. In the most recent decade, increasingly larger shares of IDEA appropriations were allocated to states based on the formula’s population-poverty calculation. However, the formula’s population-poverty calculation is a poor proxy for the number of children needing special education services in a state, and instead disadvantages states with larger shares of students receiving special education.

Policy proposals that would significantly increase federal funding for special education - including efforts to “fully fund” IDEA - bring a new sense of urgency to reconsidering the formula used to allocate IDEA appropriations. Simply adding dollars to existing IDEA appropriations without modifying the current formula works against IDEA’s promise to equalize educational opportunities for students with disabilities.

State-Level Funding Models and Mechanisms

States employ various methods to distribute K-12 funding to school districts, which impact the resources available for special education services. Understanding these different approaches is essential for evaluating the equity and adequacy of special education funding across the country.

Enrollment vs. Attendance-Based Funding

States also take different approaches to how they count students for funding purposes. There are 44 states and the District of Columbia that use enrollment and 6 states that use attendance to count students to determine funding allocations.

Common State-Level Funding Models

Multiple Student or Single Student Weights Funding: Most states use multiple student weight as their funding mechanism to account for students who might cost more to educate based on factors like severity of disability or resources needed. This ultimately leads to allocating more funds for students with greater needs. Other states use Single student Weight systems which provide funding for each student with a disability.
Census-Based Funding: In some states, it is assumed that each district has the same percentage of students with disabilities, rather than the actual number of students receiving services.
Resource-Allocation Funding: Under this model, the state distributes resources instead of dollars based on the number of students requiring special education services. For example, a state may provide one teacher and one aid for every student who may need individualized support.

In addition to formula-based funding, states can also provide competitive funding opportunities to support specific project-based programming.

The New Hampshire Example: Local Burden and State Support

In New Hampshire, during the 2022-2023 school year, 30,964 (19.67%) students received Special Education Services. Even though funding for students with disabilities is included as part of the State of New Hampshire’s adequate education funding formula, only 17.47% of the actual costs are covered by the state and federal governments.

The total operating cost of the public schools in New Hampshire was $3,814,617,345 in 2022-23. In the same year, disability services expenditures reached $915,220,910, 24% of the total cost of education in public schools. According to data published by the Department of Revenue Administration (DRA) and Department of Education (DoE), on average, 70% of all revenues funding New Hampshire’s public schools come from local property taxes.

The average cost to educate one student for the 2022-2023 academic year in New Hampshire was $24,234, including transportation. The State contributed a base grant of $3,786 for every public school student. The State added $1,893 for students eligible for free and reduced-priced meals (FRL), an additional $2,037 for students with IEPs, an additional $740 for students who were English language learners, and an additional $740 for students below proficiency in 3rd grade reading. On average, the state paid 25% of the total cost to educate one non-IEP student yearly (about $4,900).

The DoE adequacy grant calculation spreadsheet for 2022-23 noted that 30,964 students received disability services (ADM/R). On average, the cost per pupil for these students was $47,976. This is $29,556.90 more per student than students without IEPs.

For 2022-23, the DoE report stated that total Special Education costs were $915,220,910.61. The remainder of the costs associated with IEPs, $755,367,547, was paid by the local school tax in each NH municipality. The federal and state governments together paid only 17.47% of the total costs, most of which is a result of federal or state-mandated services. Local property taxpayers picked up the remaining 82.53%. These costs, however, are not evenly distributed among the districts and towns of the state. More than half of New Hampshire’s municipalities have below-average property tax bases.

State Special Education Aid, also known as Catastrophic Aid, is reimbursed to schools for each student that costs 3.5 times the state average of $21,534 ($75,369), or more. Local school districts must meet these students’ immediate needs with no additional help from the state until the next year.

The different costs associated with providing each student federally mandated disability services are volatile and ever-changing.

In the 2025 session, Senate Bill 5263, passed by the state Legislature, made several changes to the special education funding system, including the increase of the K-12 “multiplier”, which is the formula the Legislature uses to send additional dollars to districts for each student receiving special education services, and the elimination of the artificial cap on funding for enrollment of students with disabilities.

Case Studies: District-Level Volatility in New Hampshire

Across the state, Wakefield School District experiences some of the same difficulties. Like Winchester, Wakefield is a rather small district with roughly 500 to 600 students each year. Wakefield’s special education expenditures increased by over $1 million between 2022 and 2023, causing costs to jump 11 percentage points up to 32% of the total budget. Moreover, between 2017 and 2022, disability service expenditures increased by 107%, much more than the total budget, which increased by only 29% in the same time frame.

In Concord, the number of students with IEPs had been fluctuating but saw a sharp increase in 2023. In just 6 years, the average additional cost to educate one student with an IEP student jumped $8,000 and the percentage of total expenditures increased by 3.22%.

On the other hand, Manchester School District saw its largest Special Education ADM change of 170 students between 2017 and 2020. However, the district only saw a 16-student difference in their Special Education ADM in 2023. However, in 2018, Manchester spent the highest percentage of its total expenditures on disability services (27%).

Of the 162 school districts in New Hampshire, 128 saw an increase in their special education expenditures. Students with disabilities have a federally protected right to public education. These students also deserve to not be seen as a financial burden to their local communities. While the cost to educate students with disabilities can vary widely, so can the ability of communities to pay for such services. With State and Federal governments covering less than 20% of the cost of disability services in our public schools, local school districts, and towns are tasked with not only making sure students have the proper resources but that those resources are paid for. Each of New Hampshire’s communities has vastly different abilities to raise revenues for their schools and students.

National Overview of School Funding: Equity and Adequacy

Education Law Center’s Making the Grade is an annual overview of the condition of school finance in the states. The current report presents a picture of school funding in the 2021-2022 school year, the most recent data available. Funding levels vary greatly across the country with the five highest funded states spending over $5,000 per pupil more than the national average ($16,645), and the five lowest funded states spending over $4,000 per pupil less.

States are making vastly different levels of effort to fund education; effort is measured as state and local revenue for PK-12 education as a percentage of state GDP. In the highest effort state (Vermont), education revenue is 5.5% of GDP while in the lowest effort state (Arizona) it is just 2.05%. Schools in many of the highest effort states benefit from a double advantage - high effort on top of high fiscal capacity. Schools in many of the lowest effort states suffer from a double disadvantage - low effort on top of low capacity.

In the 2021-2022 school year, schools were still confronting the consequences of school closures and disruptions from the global pandemic. Students were struggling, both in academic and social-emotional terms. More than two-thirds of public schools reported an increase in the number of students seeking mental health services. In 2021-2022, nearly half of public schools reported teaching vacancies, which were more prevalent in predominantly non-white and high-poverty schools.

CBPP identified 26 states that cut income taxes between 2021 and 2023. Starting in 2022, states also embarked on the harmful trend of enacting universal voucher programs with no income or other eligibility requirements. Already, nearly one in every four states has universal or near universal vouchers. Researchers estimate that universal vouchers increase the total public costs of education by between 11% and 33%.

More states are adopting funding systems where high-poverty districts receive more funding than their low-poverty neighbors, but in many states these funding boosts are modest and may not fully account for the additional needs generated by student poverty. Moreover, the disparities in average funding levels among states remain vast, creating enormous gaps in educational opportunity by region. States are confronting the fiscal cliff created by expiring federal Covid relief funds, and the future of more traditional federal funding (IDEA, Title I, etc.) is uncertain.

Key Metrics for Evaluating School Funding

Funding Level: Determined by dividing state and local revenue for PK-12 education by student enrollment. Federal revenue is not included, except for Indian, Native Hawaiian, and Alaska Native Education Aid (Title VI) and Impact Aid (Title VII), as they are intended to replace, not supplement, state and local funds.
Funding Distribution: Utilizes a modified version of the regression-based method developed by Bruce Baker to model the pattern of funding relative to district poverty within each state.
Funding Effort: Measured as total state and local revenue for PK-12 education divided by the state’s gross domestic product (GDP).

Trends in School Funding Disparities

Our analysis highlights the significant disparities in per-pupil funding across states, with many states spending thousands of dollars per pupil more than the national average, and other states spending thousands of dollars per pupil less.

Funding gaps among states have remained relatively consistent over time. The gap between the most and least funded states has remained between $13,000 and $14,000 per pupil since 2012.

Nominally, all but ten states increased per-pupil funding levels between 2021 and 2022. However, with inflation as high as it was between 2021 and 2022, even significant revenue increases may not actually translate into more purchasing power. When taking into account the high inflation rate, only eight states had more per-pupil funding available in 2022 than in 2021.

Funding Distribution and Equity

The hallmark of a fair and equitable school finance system is that it delivers more funding to educate students in high-poverty districts. States are defined as “progressive” if high-poverty districts receive at least 5% additional funding relative to low-poverty districts. States that do the opposite, where high-poverty districts receive at least 5% less funding than low-poverty districts, are “regressive.” States with similar funding levels in high- and low-poverty districts have “flat” distribution systems.

In 2022, 28 states had at least a modestly progressive funding distribution, providing high-poverty districts with at least 5% more funding than low-poverty districts. Nine states had a flat distribution, and 11 states were regressive where high-poverty districts received at least 5% less funding than low-poverty districts.

The positive trend of more states becoming progressive is largely due to incremental gains shifting formerly flat states to progressive.

Navigating the Current Funding Landscape

Debates about how to approach public school funding are reaching a boiling point nationwide. Now in 2025, most of the federal aid tied to the COVID-19 pandemic has expired and many school districts are dealing with budget deficits. And-following a slowdown in tax revenue-states are tightening their belts.

During the pandemic, many states enacted "hold harmless" policies to maintain existing levels of school funding despite declines in enrollment on the assumption that many of those students would eventually return. However, these policies are expiring, and enrollment has not recovered from the sharp declines in 2020.

In the meantime, student needs, such as those covered in individualized education plans (IEPs) and other learning accommodations, have increased demand for special education-related spending that might not be entirely covered by current funding parameters. Oregon’s current formula caps special education funding tied to IEPs at 11% of students statewide, even though the share of students with IEPs has grown to 15%. From fiscal 2001 through fiscal 2023 (the most recent year of data available), 41 states saw higher percentages of students in need of special education services.

As states look to revamp their funding policies, policymakers will need to consider how to effectively address expanded pupil needs with fewer resources. To come up with effective approaches, good data will be essential.

Pandemic era disruptions-most notably schools’ inability to provide in-person instruction-led many families to opt out of their public schools.

Private school choice policies provide state funding through vouchers, tax credits, or education savings accounts (ESAs) for families to pursue options beyond their children’s assigned public schools. Over the past three years, the expansion of ESAs-government-authorized savings accounts that families can use to cover portions of private school tuition or homeschooling costs-has been on the rise.

Debates over school choice policies-and their cost-continue to loom large.

Increased federal funding and tax revenue provided a temporary fix for increased demand for learning services from policymakers and parents alike.

With districts facing looming funding cuts and already planning school closures linked to weakening enrollment, states face a perpetual cycle of right-sizing school districts and funding formulas, in addition to balancing increased demand for nonpublic options.

As legislators look to the next decade, they cannot afford to address only the short-term issues but also must consider how current funding formulas and school choice programs fit into the future of K-12 funding. Doing so in a time of increased resource constraint will be difficult.

The Role of Private Foundations

In addition to public funding, private foundations have become an increasingly important source of grant funding for special education initiatives. Foundations such as the Learning Disabilities Foundation of America, Dorothea Haus Ross Foundation, the Charles Lafitte Foundation, and many other smaller regional organizations are dedicated to serving students with disabilities and promoting educational equity. These private funds are either distributed through a closed application process or through open competitions, and are used to support research and innovation in special education practices, teacher training, technology development, and inclusive classroom environments.

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