Proposed Special Education Laws Seek To Reduce Overlabeling Of Children

Issue Brief

Are funding incentives in America’s special education system causing school districts to place children there who are not truly disabled? Congress has concluded this is a strong possibility, and reform bills passed by the House and Senate offer two different approaches to fixing the problem.

“Current methods of identifying children with disabilities lack validity or reliability,” observed Representative Michael Castle, a primary author of the House plan. A Presidential commission appointed to study special education agreed with him. The outlook for such children is worsened considerably by the fact that these programs’ academic progress is significantly below what many policymakers have described as appropriate, and that exit rates from special education are virtually nonexistent.

Recently much evidence has emerged, thanks in large part to work by Manhattan Institute researchers Jay Greene and Greg Forster, linking these financial incentives with the accelerated rate at which students are being labeled with disabilities. Other research has shown that predominantly white school districts place minority students into special education at significantly higher rates.

Analysis by the Congressional Research Service concludes that the Senate’s new funding formula, in tandem with other proposed changes, would sharply reduce financial incentives for such overlabeling. The analysis projects that the changes will begin to reduce the growth of the special ed population by FY 2007, and lead to substantial reduction during the subsequent 4 years. The Senate formula would link future federal special education funding increases to individual states to population growth and poverty levels, as opposed to the current system which ties them directly to the number of students identified as disabled.

Meanwhile, the proposal passed by the House last year includes some of the same reforms, such as an increased focus on early reading, while adding others. It keeps the present “bounty system,” where funding increases are triggered by students identified as disabled. But the plan retains a cap of 13.5 percent on the number of children age 3-17 for whom states can receive federal special education funds. House leaders expect overidentification will be reduced as more states approach that funding threshold. Currently two states, Rhode Island and West Virginia, have special education populations already above that limit.

Now that the Senate has passed its bill, the marathon reauthorization process may be nearing the finish line. While the two versions have differences, veteran observers suggested that they are not insurmountable and can still be overcome in the current session. Success may depend on how quickly a Conference committee can be named and get to work. And despite repeated delays and fervent protestations from entrenched interests, Congress stands a good chance of producing a plan containing some valuable reforms.