GUEST COLUMN.

Discussions of special education funding often fixate on federally oriented questions: Will Congress fully fund the Individuals with Disabilities Education Act (IDEA)? How will federal oversight change? Will the current administration alter how special education dollars flow? Those questions matter—but they can distract from a more immediate and consequential reality: The biggest risks—and the most practical levers—sit in state budgets that are about to face serious fiscal headwinds.

When Congress enacted IDEA, it mandated that public schools provide a free appropriate public education (FAPE) for all eligible students with disabilities. It authorized federal funding to cover up to 40 percent of the excess cost of educating these young people. That commitment was intended to support states and districts as they delivered specialized instruction, therapies, transportation, and related services required to ensure a free appropriate public education.

But federal appropriations have never come close to that level. In practice, IDEA dollars typically cover between 10 and 20 percent of estimated excess costs nationwide. The remainder is paid for by state and local governments—through a mix of state aid for special education, general education funding, and local revenues. Recent increases in federal appropriations have not fundamentally altered this balance.

What’s more, IDEA funding is allocated using a formula rooted in historical base amounts set decades ago, resulting in wide variation in federal funding per student with disabilities across states. These differences often bear little relationship to current enrollment, poverty, or service intensity. As a result, some states already shoulder a much larger share of special education costs than others.

This uneven federal contribution does not create the state funding challenge—but it helps explain why looming fiscal pressure will be felt more acutely in some states than in others. As budgets tighten, states that already receive relatively less federal support per student will face sharper tradeoffs, not because their obligations under IDEA are different, but because federal funding covers less of the cost.

Given the limited federal role, it is important to put current debates about the future of federal special education funding policy in proper context. States and districts are understandably anxious about proposals to reorganize federal education agencies, shift oversight responsibilities, loosen enforcement, or restructure federal funding through mechanisms such as block grants. These debates raise real concerns about accountability and students’ rights.

Why states are the real fulcrum

In the absence of robust federal funding, states play a central role in financing special education—but they do not all play that role in the same way. In practice, the United States has 50 distinct state approaches to funding special education, reflecting different policy choices about how much responsibility states assume and how they distribute aid to local districts.

While all states provide some form of supplemental funding to help districts cover excess costs, the level of support and generosity varies dramatically. Some states reimburse districts for nearly all their special education expenditures, effectively assuming close to 100 percent of the excess cost. Others provide only modest categorical aid, covering less than five percent of what districts spend on special education services. Most states fall somewhere in between, using a mix of weighted student formulas, flat grants, cost-reimbursement systems, or high-cost student funds.

These differences matter. States that provide more robust and predictable funding give districts greater capacity to hire specialized staff, manage caseloads, deliver early intervention, and avoid diverting general education dollars to meet IDEA obligations. In states where funding is more limited or less responsive to need, districts must rely more heavily on local revenues or unrestricted general education dollars, increasing fiscal strain and amplifying inequities across communities.

Importantly, IDEA does not require states to fund special education at a specific level; however, once states choose to provide funding, IDEA requires them maintain that support. But, IDEA does not prescribe how states fund special education. Decisions about how much to spend—and how to structure aid—rest largely with state policymakers, who at the same time are compelled by their constitution to ensure public schools are adequately funded, a standard that state courts have repeatedly interpreted to include services for students with disabilities.

This creates a central tension: states are legally responsible for ensuring adequate funding for special education but are fiscally exposed when budgets tighten. How states resolve that tension—and how generous or constrained their funding systems are—has real consequences for districts’ ability to meet their obligations under IDEA.

State budgets are about to get tighter

This state role is challenging even in a strong fiscal environment. But the timing is particularly fraught right now. Education and health care together account for the lion’s share of most states’ general fund spending. With mounting pressure to constrain Medicaid growth, potential reductions in federal health care support, and rising demands tied to an aging population, state policymakers are increasingly forced to make difficult tradeoffs.

When budgets tighten, education spending often comes under scrutiny—and within education, special education stands out as both essential and costly. Because districts cannot scale back IDEA services when funding falls short, reductions in state support shift pressure downward, increasing reliance on local revenues or squeezing general education programs.

This is where the real risk lies. State budget decisions will determine whether districts can sustain services, invest in prevention, and meet constitutional obligations without destabilizing their broader educational programs.

Keeping our eye on the right ball

None of this is an argument against increasing federal IDEA funding or modernizing federal formulas. Those reforms are necessary and overdue. But for state and local leaders, the most urgent task is ensuring that state funding systems are stable, fair, and responsive to need—especially as fiscal pressures mount.

That means scrutinizing whether state formulas align funding with the cost of providing evidence-based special education services, whether high-cost student programs are adequately funded, and whether districts serving higher-need populations are disproportionately forced to backfill special education with unrestricted dollars.

The future of special education funding will not be decided by a single federal appropriation or administrative memo. It will be shaped by how states balance competing demands, design their funding systems, and uphold constitutional responsibilities in the face of tightening budgets. Keeping focus where it belongs, means watching state budgets as closely as federal debates—and preparing for the difficult tradeoffs ahead.

The contents of this Guest Column are those of the author, and not necessarily Barrett and Greene, Inc. 

#StateandLocalGovernmentManagement #StateandLocalManagement #StateandLocalSpecialEducationManagement #StateandLocalSpecialEducationPerformance #SpecialEducationFunding #SpecialEducationFundingPressure #SpecialEducationStateFundingRisk #FederalIDEAFunding #IntergovermentalRelationsAndSpecialEducation #StateandLocalBudgeting #StateandLocalBudgetingAndSpecialEducation #StateBudgetGaps #StateSpendingPressuresForFY2026 #TighteningStateBudgetEnvironment #StateRoleInSpecialEducationFunding #StateAidToLocalSpecialEducation #AmericanInstitutesForResearch #SpecialEducationFundingAndStateSpendingPressures #TammyKolbe #SpecialEducationAndFederalStateLocalResponsibility #EnsuringFairStateSpecialEducationFunding #SpecialEducationLocalFundingPressure #ConstrainedSpecialEducationFunding #StateRoleInSpecialEducationFunding #BandGGuestColumn #BarrettandGreeneInc