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‘Help us’: Minnesota school officials plead with lawmakers to fix special education cross-subsidy

Special education costs a lot more than what either the state or federal government has been willing to pay for it.

Rep. Angie Craig and Sen. Tina Smith
Rep. Angie Craig and Sen. Tina Smith are supporting legislation to increase federal funding for special education, which has been underfunded for decades.
MinnPost photo by Taryn Phaneuf

In the late afternoon on the first Friday in May, a group of about 30 teachers, parents, and specialists filed into a room at Henry Sibley High School in Mendota Heights. It was clear and warm outside, but the group took their seats around a set of tables to talk about special education.

U.S. Rep. Angie Craig, in whose district Henry Sibley is located, called the meeting and invited Sen. Tina Smith to join. The two are supporting legislation to increase federal funding for special education, which has been underfunded for decades. At the same time, enrollment and costs have “exploded” in the West St. Paul-Mendota Heights-Eagan school district.

Craig, who has a son with special needs, has met with constituents on several occasions to learn how the lack of federal funding plays out in their schools. “The impact on our local communities is dramatic,” Craig said after the meeting. “We’re sending our federal dollars to Washington and we’re not getting that money back.”

Like most others in the state, the West St. Paul-Mendota Heights-Eagan district subsidizes special education services with state and local aid that’s supposed to go toward paying teachers and staff, funding new programs, and buying supplies. Known as the cross-subsidy, the shortfall between the district’s special education costs and their revenue added up to $747 per pupil in 2017, the most recent year data is available from the Minnesota Department of Education. In all, the shortfall was more than $4 million.

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It could be worse. The West St. Paul-Mendota Heights-Eagan district’s cross-subsidy was lower than the state average for that year. And while others have already cut non-essential programs because of the shortfall, the district still offers music in middle school, school board chair Joanne Mansur told Craig and Smith. But even in the supportive and dedicated community they’ve fostered, the nature of the funding scheme pits groups of students against each other. “It’s a systematic thing that needs to be fixed,” she said. “Help us.”

Lawmakers get it. But will they change it?

The responsibility for the cross-subsidy ultimately falls on the federal government, which passed mandates for special education programs back in the 1970s, setting the foundation for the system that exists today.

Back then, federal lawmakers said they’d pay 40 percent of program costs. But they haven’t. Instead, federal aid has been at or below 15 percent of special education costs (with the exception of 2010, when a recession recovery funding package doubled special education aid for that year).

Minnesota lawmakers are now talking about the problem in both the state Legislature and in Congress. Craig is working with Republican U.S. Rep. Pete Stauber to get congressional newcomers on board with a bill that would increase federal aid over the next 10 years to get to the 40 percent portion. Smith is signed on to a similar proposal in the Senate, but it lacks the bipartisan effort of the House. “It’s going to be a real struggle to get this through this year,” Smith said. “It’s a question of priorities.”

Rep. Angie Craig speaking with state Sen. Jim Carlson
MinnPost photo by Taryn Phaneuf
Rep. Angie Craig speaking with state Sen. Jim Carlson, DFL-Eagan, following Friday's discussion.
In St. Paul, the governor and DFL-controlled House have proposed allocating enough state aid to freeze the cross-subsidy for the next two years and increase general education spending by 5 percent over the same period. But they’ll have to convince Republicans to spend that much. The GOP-controlled state Senate’s plan includes a half a percent increase in general education funding in each of the next two years and doesn’t include any new funding for special education.

Groups lobbying the state Legislature about the issue this session have said freezing the cross-subsidy doesn’t do enough because districts aren’t equally affected by it. The districts in the worst position would continue to pay the highest cross-subsidies.

Scott Croonquist, executive director of the Association of Metropolitan School Districts, said taxpayers and legislators alike misunderstand how the cross-subsidy influences school budgets. Many see an increase in general education funding that matches inflation and assume that will fix things. But the money is “really being spent on special education instead of general education,” he said. “It’s become really a crushing burden for many districts and largely explains the financial challenges that many of them face.”

Where it hurts the most

So what does the cross-subsidy look like for different districts in the state?

Three vastly different districts had the largest cross subsidies in 2017. At Nett Lake, a rural district in northern Minnesota that serves the Bois Forte Band of Chippewa, special education costs outstripped state and federal aid at a rate of $1,677 per pupil. That’s more than twice the state average that year and higher than Minneapolis Public Schools, where the cross-subsidy was $1,445 per pupil, and St. Cloud Area School District, where it was $1,282 per pupil that year.

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But because Nett Lake is a small district, with just more than 100 students, the total cost of its cross-subsidy was about $182,000, compared to $55 million for Minneapolis and about $14 million for St. Cloud.

Sen. Tina Smith, right, speaking with Superintendent Peter Olson-Skog
MinnPost photo by Taryn Phaneuf
Sen. Tina Smith, right, speaking with Superintendent Peter Olson-Skog of West St. Paul-Mendota Heights-Eagan Area Schools, center, following the meeting.
The change over time has been most dramatic in the smallest districts. A MinnPost analysis of cross-subsidy data from 2002 to 2017 shows the cross-subsidy per pupil more than tripled in 10 rural districts, and more than doubled in 50 others.

Per-pupil cross subsidy for Minnesota school districts, 2017
Change in cross-subsidy since 2002 could not be calculated for districts that were created after 2002.
Source: Minnesota Department of Education

Minneapolis (+186 percent) and Columbia Heights (+183 percent) recorded the largest increases in the metro.

Red Lake School District saw its cross-subsidy grow by 171 percent — the largest increase of the public school districts where American Indian students make up the entire or the majority of the student body, including Nett Lake.

For some districts, the cross-subsidy is “a nagging problem but it doesn’t break the bank,” said Fred Nolan, executive director of Minnesota Rural Education Association. But for many others, the situation is “pants on fire,” Nolan said. “This is really hampering their ability to provide quality education.”

‘It is all one system’

Metro school districts have a higher average cross-subsidy when separated from the rest of the state. But non-metro districts experience the widest range in the amount of unfunded special education costs they have to cover. For districts with 1,000 to 2,000 students enrolled, the highest cross-subsidy per pupil in 2017 was $1,151 (at Hinckley-Finlayson Public Schools). The lowest was $233 (at Houston Public Schools).

Because they’re small, rural schools can see their costs fluctuate dramatically from year to year, depending on the changes to enrollment, Nolan said. Larger rural districts — the ones that are regional centers, like St. Cloud, Wilmar, or Albert Lea — have a high rate of kids enrolled in special education because of proximity to other services, like hospitals, and a lower cost of living than the Twin Cities. They also have job opportunities.

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“If you look at the larger greater Minnesota communities, they have higher than average cross subsidies because families gravitate toward them,” Nolan said.

School district leaders say they’re not looking for reduced mandates to cut costs for special education because they want to continue to protect special education students. But they also don’t want to short-change general education programs.

Lori Posch, executive director of learning and teaching for St. Cloud, said that, yes, costs are going up, but that’s because it’s necessary to include and serve students with a variety of needs. “When I think about the medical world and the advancements we have in medical care, I see that with our special education students, as well. Advanced technology is more expensive but it helps us better meet the needs of our students,” she said. “We are very lucky to have the diversity of students we have. We’re committed to meeting the needs of all our students and we hope the state would be on board with helping us do that equitably.”

At a metro school district like West St. Paul-Mendota Heights-Eagan, administrators and staff want more training, more space in specialized programs that have long waiting lists, and more counseling and mental health services. The ripple effect of dipping into general education funding for special education services exacerbates the problem, superintendent Peter Olson-Skog told Craig and Smith while they met Friday.

Fewer resources for general education often means increased class sizes. That leads to less individual attention for students, whose needs may no longer able to be met in class, which leads to more individualized education programs, which leads to higher special education costs, he said. “It is all one system.”