Committee warned of rising special-education costs as OFA outlines funding limits

The Office of Fiscal Analysis told Connecticut lawmakers the stateaces mounting pressure on special-education spending and that current funding structures leave towns exposed to unpredictable excess-cost liabilities.

"In fiscal year 23, the total cost of funding special ed was about $2,600,000,000," Candice Fair, an OFA analyst, told the committee, adding that local districts bear the largest share of spending and that the state
nd federal shares are smaller components of the total.

OFA explained the excess-cost grant reimburses current-year special-education costs that exceed 4.5 times a district's net current expenditures per pupil (NCEP). Because the grant is a current-year reimbursement, OFA said it is difficult to budget and appropriation shortfalls are common: the uncapped entitlement (what districts are eligible to receive) consistently exceeds the appropriation. OFA said recent years saw a notable jump in uncapped entitlement: an estimated 11% increase for FY25 against FY24 and a previously reported 25% increase into FY24 that drove concern among members.

OFA described the reimbursement mechanism used in FY24: districts are ranked by adjusted equalized net grand list per capita and grouped into tiers that receive different reimbursement percentages. For FY24 OFA cited example reimbursement rates of roughly 71.4% for the least-wealthy tier, 69.1% for the middle tier, and 66.7% for the wealthiest tier for eligible excess-cost amounts — but OFA cautioned that when the appropriation does not cover uncapped entitlements, towns receive less than the tier percentage of their eligible amount.

Committee members pressed analysts on why costs jumped so sharply and asked for specific follow-up data: district-level lists of tier assignments, historical and current provider rates, breakdowns of excess-cost submissions (outplacement versus in-district services), and interstate comparisons of funding approaches. Senator Kissel said the fiscal impact is "dramatic" for some municipalities and asked whether the spike stems from more identifications, more costly services, or higher rates from private providers. OFA responded that the spike appears to be a combination of factors and agreed to produce more granular data to help the committee diagnose drivers.

Members also asked OFA to provide a fuller accounting of federal supports (IDEA vs Title I/II/III) and of state bodies and stakeholder groups involved in special education, and the committee asked SDE, OLR and OFA to assemble a packet of follow-up materials. OFA said it would research how other states structure excess-cost financing and whether rate schedules or statewide contracting are used as tools to contain provider price volatility.

The committee requested these fiscal datasets and scheduled further hearings and listening sessions to collect testimony from families and districts.