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to superb educators in my family:
Mrs. Clara Rasmussen Olson, Mrs. Maude Rich Dietrich, Mrs.
Emily Mildred Dietrich, Mr. Ralph B. Wanzenberg, Dr.
Chester Leathers, and Joanna Leathers
I wish to express particular gratitude for the support
and guidance of professionals who have helped shape my
research in the Department of Educational Leadership,
Policy, and Foundations and who have diligently served as
members of my supervisory committee. Dr. R. Craig Wood, B.
O. Smith Research Professor, illustrated the importance of
school finance and law in the scheme of the educating
students with disabilities. Dr. David Honeyman helped me to
conceptualize a good research design and contributed to the
development of my research question over the months. Dr.
David Miller, my chief statistics instructor, helped me to
understand the daunting world of quantitative analysis.
Finally, Dr. James Doud--besides offering me intellectual
"safe harbor" and research opportunities in the department-
-has always brought legal and financial concepts back to
the ultimate question in educational research: how does
this make for better learning?
The guidance of my family and loved ones should be duly
noted. By my great grandmothers, Clara Rasmussen Olson and
Maude Rich Dietrich, I am a fourth generation educator.
From the humble schoolhouse in High Springs administrated
by my grandmother, Emily Mildred Dietrich, to the
classrooms of my mother and father, Joanna Leathers and the
late Ralph B. Wanzenberg, the family history of commitment
to public education has been clearly indicated. Chester
Leathers--the individual with whom I can most directly
credit my passion for the education of all children--has
been a beacon of support through every inch of my graduate
and professional career. These individuals have given me
safe asylum from the duress of special education and
research and have helped me to bring the broadest of
concepts back to the application of the working classroom.
To this legacy of superb educators, I dedicate this paper.
Most importantly, I would like to thank Anne Wheaton
Wanzenberg, my wife. Without her love and support, I could
never have put my passion to paper.
ACKNOWLEDGEMENTS . . iii
ABSTRACT . . viii
Problem Structuring and Policy Problems .. 2
Policy Contradictions and the IDEA. .. .5
Statement of the Problem . .5
Purpose of the Study .. .6
Justification of the Study. . .7
Method of the Study .. . 7
Definition of the Terms . 8
Limitations . . 8
Organization of the Study. . 10
Equity and Special Education Finance 15
Federalism and Special Education .. ... 29
Philosophical, Historical, and Statutory
Foundations of Special Education. ..35
Funding Formulas and Incentives and Disincentives in
Special Education . .. .. 62
Cost Analysis Methodologies . 69
Major Court Cases and Federal and State
Laws Relating to Special Education Finance. .82
Sources of Information . .... .124
Data Organization . .. 126
Data Analysis . .. 126
Synthesis . . .. 127
Standards for Adequacy for Policy Analysis. .128
Data Analysis from Policy Relevant Sources. .132
Analysis of Pertinent Court Cases 133
Analysis of Congressional Goals. . 140
Analysis of Congressional Documents. 142
Analysis of Federal Statutes and Regulations. 151
Analysis of State Funding Typologies. .154
Analysis of Biased Funding Characteristics. .163
Analysis of Department of
Education Statements. . .. 169
Analysis of State Funding Statutes. .172
Forecasting and Evaluation of
Policy Relevant Data. . .. 192
Summary of Findings . .. 193
Ranking of Policy Issues and Alternatives. 198
Derived Model of Placement
Neutrality Policy. .. .. 203
Practical Inference of Proposed Theory. .. 206
Recommendations for Further Study. ... 210
. 246
Abstract of Dissertation Presented to the Graduate School
of the University of Florida in Partial Fulfillment of
the Requirements for the Degree of
Doctor of Philosophy
Matthew C. Wanzenberg
December, 1999
Chairman: Dr. R. Craig Wood
Major Department: Educational Leadership, Policy, and
The author explored the legal and policy implications
of federal law that either promoted or did not prohibit
special education funding based upon more restrictive
settings. This analysis derived a proposed placement
neutrality policy for the federal government. The analysis
revealed the constitutional implications of federal funding
policy that was not placement neutral; that is, based on
fiscal incentives for more restrictive, costlier special
education placements.
The federal policy analysis of contemporary special
education finance examined whether (a) the Indivduals with
Disabilities Education Act's goals could be
constitutionally fulfilled within the context of placement
biased funding, (b) the legal doctrine of the Least
Restrictive Environment (LRE) could exist in tandem with
funding policies that either did not promote placement
neutrality or that encouraged fiscal bias, and (c) federal
requirements were utilized to either promote placement
neutrality or prohibit fiscal bias. The author analyzed
(a) pertinent court cases, (b) congressional goals, (c)
congressional documents, (c) federal statutes and
regulations, (d) state funding typologies, (e) biased
funding characteristics, (f) Department of Education
statements, and (g) state funding statutes.
The legal analysis revealed that--in the absence of
due process--placement-biased funding could violate the
Equal Protection Clause of the U.S. Constitution.
The policy model provided addendum to the current federal
law to provide for (a) comprehensive federal statutes
prohibiting placement biased funding, (b) a finance reform
timeline to transition non-compliant states, and (c) a
national transition plan.
The purpose of this study was to develop a federal
special education finance policy for placement neutrality
that was within contemporary constitutional and statutory
parameters. The researcher scrutinized the longitudinal
legislative intent and fiscal aspects of the Individuals with
Disabilities Education Act (IDEA).1 The study warranted a
policy examination posed within the framework of
prescriptive, ex-post analysis. This analysis reviewed state
and federal legislation and case law and yielded two seminal
U.S. Supreme Court decisions, two federal district court
rulings, and three state court rulings. The legal analysis of
these cases contributed to an understanding of special
education finance and law and the policy dilemmas posed by
placement biased special education funding. Another component
of this analysis involved the examination of (a) pertinent
court cases, (b) congressional goals, (c) congressional
documents, (c) federal statutes and regulations, (d) state
funding typologies, (e) biased funding characteristics, (f)
Department of Education statements, and (g) state funding
statutes relating to the funding of special education
Problem Structuring and Policy Problems
The protection of students with disabilities from total
exclusion accorded with a history of U.S. Supreme Court2 and
Federal District Court rulings.3 This equal protection
entitled students with disabilities to a free and appropriate
public education (FAPE) that was meaningful4 and highly
individualized to their needs.5 Although a history of formal
equal protection in special education was established for
nearly a quarter-century,6 a state-assistance program without
fiscal defects has not been realized. The federal special
education program has sought to strike a balance between the
needs of the quasi-suspect class of students with
disabilities7 and the practical responsibilities of the states
within the Union.8 In this manner, the IDEA has regulated many
aspects of the state special education program to the State
Educational Agency (SEA) but has delegated school funding
methods to the states' political and economic schema.9
Research has indicated a lack of coordinated effort to
align the service delivery mechanisms or funding of these
methods."1 Policy problems were indicated when the federal
government either promoted or did not prohibit placement
biased funding of state and federal special education
programs. This placement bias was indicated by the over-
classification of students with disabilities," inappropriate
special education programs,12 and educational spending that
did not accord with contemporary finance equity theory.13
Many researchers have described fiscal biases that could
undermine the integrity of the least restrictive environment
(LRE).14 These funding practices either purposely or
inadvertently created special education programs that did not
promote the maximization of equal educational opportunity in
normalized school environments. Although the U.S. Supreme
Court has maintained neutrality on the regulatory subject of
wealth disparity of schools,15 the nature of the LRE was a
legal issue that the courts have actively ruled upon. A
review of relevant case law revealed that the U.S. Supreme
Court was indisposed to ignore threats to LRE, whether they
appeared as programmatic or as fiscal shortcomings.16 Recent
developments in three state supreme courts have indicated the
need for alternative special education funding practices that
were based upon research-based cost differentials.'7 These
rulings revealed a judicial urgency that recommended the
utilization of funding practices that were both adequate and
accessible and that did not encroach upon regular education
finance."s A litigative summary of recent special education
finance also revealed the reluctant recommendation of funding
practices that could jeopardize the LRE.'9 If the trend of
school finance litigation continues in this manner, the
constitutionality of placement bias would eventually come
into question at the federal level.
One of the sponsors of P.L. 94-142 summarized the chief
policy concern of these findings:
If the law has been massively successful in
assigning responsibility for students and setting
up the mechanisms to assure that schools carry out
these responsibilities, it has been less successful
in removing the barriers between general and
special education. It [P.L. 94-142] did not
anticipate that the artifice of delivery systems in
schools might drive the maintenance of separate
services and keep students from the mainstream
The primary problem appears to lie in our
assumptions about students and the consequences for
the organization of schools; that there are
distinct groups of youngsters--disabled and
nondisabled--and thus need for a distinct set of
services which require divisions of funding,
service delivery, and organizational patterns.20
The body of special education finance research,
described in detail in Chapter 2, revealed a federal program
that was relatively disconnected from the status of current
school finance litigation in the states. Analysis of the
literature revealed a need for the alignment of federal
policy regarding funding and the LRE. Therefore, the purpose
of this analysis was to derive legal data for a
constitutionally sound, federal policy framework in Chapter
5. The specific research questions structured for this
analysis were
1. Are the IDEA's goals--as mandated by Congress--
legally fulfilled within the fiscal parameters of
categorical special education programs that may
assume placement bias?
2. Can the legal doctrine of the Least Restrictive
Environment (LRE) exist in tandem with funding
policies that either (a) do not promote placement
neutrality or (b) encourage fiscal bias?
3. What federal requirements exist to either promote
placement neutrality or prohibit fiscal bias?
Data derived from these questions served to formulate a
revised policy framework for the federal government. This
revised policy would then be utilized by policymakers to
streamline future revisions of the IDEA to be less
therapeutic, more placement neutral, and generally more
effective in its provision for a free and appropriate public
education in the least restrictive environment.
Policy Contradictions and the IDEA
Within the context of federal special education policy,
the literature revealed a pattern of distinct fiscal
paradoxes.21 The body of policy research indicated a natural
tension between the tenets of federal law22 and the systems
that are employed to apply these concepts.23 This research has
also evinced that highly categorical finance formulas
jeopardize the least restrictive environment with labels and
self-fulfilling special education placements.24 If state
policymakers and consumers of special education were to avoid
unnecessary litigation, this policy contradiction must be
Statement of the Problem
The body of special education finance literature
identified a rapid growth26 in special education programs.
Inherent to the IDEA, however, were identifiable and divisive
measures that promoted a growth that was not justified by
actual incident rates of disability. This growth--and the
cost associated with it--has required policymakers to be
increasingly aware of the nature of federal provisions that
authorize special education programs. The problem arose when
federal laws either created incentives27 for or did not
prohibit funding practices that---in the words of the Office
of Special Education Programs--"clash[ed] with the letter of
federal and state law."28
Purpose of the Study
As legal scholars have contended,29 the due-process
provisions of the IDEA30 were the most elaborate machinations
ever devised by Congress to resolve the disputes between
student and school district. This provision has facilitated
an abundance of complaints regarding the equitable
administration of special education programs. In the words of
Turnbull, these substantive due-process provisions have
created "massive and unpredictable judicial responses."n
The doctrine of preventive law suggests that the
consummate way to deal with a legal problem is to prevent it
from happening.3 The purpose of the study was to provide, if
necessary, a revised model of federal special education
finance policy based on relevant case, state, and
constitutional law. The study was arranged within the
philosophical framework of the IDEA and disability
legislation preceding this public law.33 The study measured
the policy congruence of federal special education funding
regulations to the original concepts that authorized them.
Justification of the Study
The Center for Special Education Finance (CSEF)34 and the
Office of Special Education Programs (OSEP)35 have raised the
issue of funding approaches that run contrary to the least
restrictive spirit of the IDEA. Turnbull noted that the
inappropriate allocation of special education resources were
a part of a powerful, longstanding trend that was not always
correctable by the courts.36 It was logical to assume that
without analysis of current federal policy, further drafts of
this federal law could be left to the unpredictable and
costly devices of the courts. Moreover, the potential for
growth in the area of special education was clearly indicated
by the body of research. It was, therefore, paramount to
policymakers to be provided with an analysis of funding
practices that would provide legal means to equitable and
efficient ends. Congressional and state lawmakers need to be
provided with (a) information that will assist them in
developing special education funding policies that best
reflect the goals and missions of the IDEA, and (b) some
degree of predictability concerning potential litigation.
This federal policy analysis study is justified as such an
attempt to render assistance on this germane issue.
Method of Study
The traditional methodology of legal and policy analysis
research was utilized to identify historical legal
precedence, substantive historical legal principles, and
sound methods of special education funding.
The research process required the identification and
policy analysis of relevant Constitutional amendments,
federal statutes and regulations pertaining to the special
education finance program. Where appropriate, relevant cases
were examined and judicial reasoning in each case was
State funding statutes were then examined from the
disposition of the aforementioned legal and policy analysis.
The evolution of educational disability law and data derived
from congressional documents were of particular concern to
the researcher. This information was then utilized to
formulate a model that would guide the equitable
administration of special education finance programs within
the guise of federal law. This resource would then be
utilized by state and federal lawmakers and policy analysts
as a tool to formulate or amend legally ambiguous policies.
Policymakers and legislatures might otherwise target these
policies for clarification in the courts.
Definition of Terms
The primary sources for the definition of all legal
terms in this study were Pollock's Fundamentals of Legal
Research37 and the Federal Register. A list of applicable
terms, definitions, and concepts appears in Appendix A of
this study.
Although this study had ultimate applicability to all
states, legal case studies have been limited to states in
which special education finance litigation was indicated.
Furthermore, this policy analysis recognized the disparate
funding methods for special education programs. With regard
to state constitutional issues, this variability of funding
methods limited this analysis to a comprehensive study. This
study was limited to the measure of federal policy congruence
to federal policy foundations. The study broadly analyzed the
alignment between the federal principles outlined in the IDEA
and the approaches associated with the finance of special
education programs.
The scope and philosophical framework of this study were
based on the most contemporary amendments to the Individuals
with Disabilities Education Act Amendments of 1997.38 Within
the traditional frameworks of legal and federal policy
analysis, the study was challenged to apply or extrapolate
the outcomes or prospective interpretations to such recently
amended federal law. At the time of this study, the courts
had not fully addressed the nature of placement biased
funding. Litigation relating to the equitable funding of
post-P.L. 105-17 special education programs continues to
evolve.39 With this consideration, this researcher has created
a timely analysis based on the fundamental concepts relating
to the funding of programs for students with disabilities
that have sustained the IDEA through its evolution as a
public law.
Organization of the Study
In Chapter 2, a literature review providing crucial
exposition on the development and interpretation of the IDEA
is presented. A review of research, legal doctrines, federal
administrative law, and relevant case law is also provided.
The methodology of the research is described in Chapter
3. In this section, the author explains the traditional
methodology of legal research and the procedure of legal
analysis when measuring the alignment between federal and
state policy. The derived federal policy model and the
standards of adequacy for legal research are also discussed.
An analysis of federal policy and case law are presented
in Chapter 4. This section includes a topical analysis of (a)
pertinent court cases, (b) congressional goals, (c)
congressional documents, (c) federal statutes and
regulations, (d) state funding typologies, (e) biased funding
characteristics, (f) Department of Education statements, and
(g) state funding statutes relating to the funding of special
education programs.
In Chapter 5, a revised model of federal funding policy
for special education programs and recommendations for
further research is presented. The data from legal and policy
analysis derived the aforementioned model federal policy for
placement neutrality. This model was designed to encourage
its audience to strengthen existing special education funding
schemes for more equitable and efficient outcomes.
1 Individuals with Disabilities Education Act,
amended by P.L. 101-476 (1990), amended by P.L. 102-119
(1991), amended by P.L. 105-17 (1997) [codified as
amended at 20 U.S.C. 1401-14910 (1998)].
2 Brown v. Topeka Board of Education, 347 US 483
(1954); and Hendrick Hudson District Board of Education
v. Rowley, 458 U.S. 176, 102 S. Ct. 3034, 73 L. Ed. 2d
690, (1982).
3 Pennsylvania Association for Retarded Citizens
(P.A.R.C.) v. Commonwealth of Pennsylvania, 343 F. Supp.
279 (1972); and Mills v. Board of Education, 348 F.
Supp. 866 (1972).
4 Rowley, 458 U.S. 176; and Cedar Rapids Community
School District v. Garret F., 118 S. Ct. 1793 (1999).
5 20 U.S.C. 1414 (d) (1998).
6 Education for All Handicapped Children Act, P.L.
94-142 (1975) [transferred to 20 U.S.C. 1401-1491o
7 20 U.S.C. 1403 (1998); Rowley, 458 U.S. 176;
and Cedar Rapids Community School District v. Garret F.,
118 S. Ct. 1793 (1999). A population with disabilities
has not constituted the definition of a suspect class
and only a handful of courts have recognized the suspect
or quasi-suspect class of the disabled. See, e.g.,
Frederick L. v. Thomas, 408 F. Supp. 832, 836 (E.D. Pa.
1976), aff'd, 557 F.2d. 373 (3d Cir. 1977); Fialkowski
v. Shapp, 405 F. Supp. 946, 958-59 (E.D. Pa. 1975); In
re G.H., 218 N.W.2d. 441, 446-7 (N.D. 1974).
9 20 U.S.C. 1412 (a) (19)(A) (1998).
10 Chambers, Jay G. and William T. Hartman, Special
Education Policies: Their History, Implementation, and
Finance (Philadelphia, Pennsylvania: Temple Press,
1983), 193.
11 Parrish, T. B., Special Education Finance: Past,
Present, and Future (Palo Alto, California: Center for
Special Education Finance, 1996), 25.
12 Turnbull, H. Rutherford, Free and Appropriate
Public Education: The Law and Children with Disabilities
(Denver, Colorado: Love Publishing, 1990).
13 Berne, Robert, and Stiefel, Leanna, The
Measurement of Equity in School Finance: Conceptual,
Methodological, and Empirical Dimensions (Baltimore:
Johns Hopkins University Press, 1984).
14 Verstegen, D. A., Consolidating Special Education
Funding and Services: A Federal Perspective (Palo Alto,
California: Center for Special Education Finance, 1996);
Parrish, T. B., Fiscal Issues in Special Education:
Removing Incentives for Restrictive Placements, (Palo
Alto, California: Center for Special Education Finance,
1994); and Parrish, T. B., Criteria for Effective
Special Education Funding Formulas (Palo Alto,
California: Center for Special Education Finance, 1995).
15 San Antonio School District v. Rodriquez, 411
U.S. 1, 93 S. 1278, 36 L. Ed. 2d 16 (1973).
16 Rowley, 458 U.S. 176.
'1 DeRolph v. Ohio, 78 Ohio St. 3d 193, 677 N.E.2d
733 (1997); Cambell v. State of Wyoming, 907 P.2d 1238
(1995); and Harper v. Hunt, 624 So. 2d 107 (1993).
18 Center for Special Education Finance (CSEF),
Spring, "Landmark Court Decision Challenge State Special
Education Funding," Issue Brief No. 9 (Spring 1998):
Palo Alto, California.
19 907 P.2d 1238.
20 Walker, L., "Procedural Rights in the Wrong
Systems," in Gartner, A., and T. Joe, Eds. Images of the
Disabled/Disabling Images (New York, New York: Praeger
21 Parrish, supra note 11.
22 20 U.S.C. 1412(a)(5) (1998).
23 Parrish, supra note 11, at 25.
24 Blackman, H., "Special Education: Is It What You
Know or Where You Live?" Exceptional Children 55 (1989):
25 CSEF, supra note 13.
26 Verstegen, D. A., T. Parrish, and J. Wolman, A
Look at Changes in the Finance Provisions for Grants to
States Under the IDEA Amendments of 1997 (Palo Alto:
California: Center for Special Education Finance, 1998),
27 Parrish, supra note 14.
28 34 C.F.R. 300.550 (1999). See, e.g., Parrish,
T. B., J. Chambers, and C. M. Guarino, Eds., Funding
Special Education (Thousand Oaks, California: Corwin
Press, 1998), viii.
29 Osbourne, A. G., Legal Issues in Special
Education (Boston, Massachusetts, Allyn and Bacon,
1996), 239.
31 Turnbull, supra note 12, at 83.
32 Osbourne, supra note 29, at 240.
34 See supra note 14.
35 Office of Special Education Programs, Twentieth
Annual Report to Congress on the Implementation of the
Individuals with Disabilities Education Act (1998),
available from: http://www.ed
36 Turnbull, supra note 12, at 186.
37 Jacobstein, J. Myron, and R. M. Mersky, Ervin H.
Pollack's Fundamentals of Legal Research (Mineola, New
York: Foundation Press, 1973).
38 Individuals with Disabilities Education Act
Amendments, P.L. 105-17 (1997).
39 Ibid.
A review of literature relating to the Individuals
with Disabilities Education Act (IDEA) and placement
neutrality provided the background for this study. The
following research questions guided the synthesis of
research in Chapter II:
1. Are the IDEA's goals--as mandated by Congress--
legally fulfilled within the fiscal parameters
of categorical special education programs that
may assume placement bias?
2. Can the legal doctrine of the Least Restrictive
Environment (LRE) exist in tandem with funding
policies that either (a) do not promote
placement neutrality or (b) encourage fiscal
3. What federal requirements exist to either
promote placement neutrality or prohibit fiscal
These research questions presented several
categories of literature that were germane to research
within that special education finance: (a) School
Finance Equity; (b) Federalism and Special Education;
(c) Philosophical, Historical, and Statutory Foundations
of Special Education Finance; (d) Funding Formulas,
Incentives, and Disincentives in Special Education; (e)
Cost Analysis Methodologies; and (f) Major Court Cases
Relating to Special Education Finance.
These particular subjects represented significant
areas of the research and literature that related to a
federal policy analysis of the special education finance
program. Research in the broader field of special
education represented a larger share of these literature
domains. However, this author limited the scope and
breadth of this literature review to the research thrust
initiatives identified by the Center for Special
Education Finance (CSEF) and to areas clearly identified
as governing factors of the special education finance
program. This review of literature provided a foundation
for an effective analysis of data for this study.
Equity and Special Education Finance
The basic tenets of American public education have
included the guarantee of equal opportunity.1 This
concept has implied that all persons, regardless of how
unequal they may be in their abilities, must be afforded
equal opportunities and equal treatment.2 The concept of
equity has assumed a more refined significance through
developments in the courts and on the Capitol floor.
Thompson, Wood, and Honeyman described special education
initiatives as a prime example of the complexities that
jurists and lawmakers have employed in their search for
equity.3 For over twenty-four years, these elaborations
have translated into a legal manifest for society to
The quest for equity represented the sine qua non
for this century's most important special education
initiatives. The legislative initiatives for students
with disabilities were presented within the framework of
normalization or social role valorization.4 The
principle of normalization--originated in part by Wolf
Wolfensberger--maintained that persons with disabilities
should live and be treated like non-disabled persons.5
Furthermore, this principle asserted that the
differences between people with and without disabilities
were psychological barriers that could be reduced by
fair treatment and the provision of socially valuable
According to Turnbull, an equal right to a free and
appropriate public education (FAPE) was a precondition
for successful social equalization.7 The legislative
intent of this ideal was paramount to the establishment
of federal special education initiatives:
The Nation has long embraced a philosophy that
the right to a free appropriate public
education is basic to equal opportunity and is
vital to secure the future and prosperity of
our people. It is contradictory to that
philosophy when that right is not assured to
all groups of people within the Nation .
over the past few years, parents of
handicapped children have begun to recognize
that their children are being denied services
which are guaranteed under the Constitution
It is this Committee's belief that the
Congress should take a more active role under
its responsibility for equal protection of the
laws to guarantee that handicapped children
are provided educational opportunity.8
Finance Equity and The Least Restrictive Environment
The concept of normalization evolved from a broad
human rights ideal into a set of refined legislative
initiatives.9 This refinement required the field of
special education to qualify its definitions of equal
treatment. The least restrictive environment (LRE) and
the equity associated with that context1" was presented
in Public Law 94-142.1 Under a provision of federal
law,12 the courts consistently upheld that the exclusion
of a child from general education must be predicated
upon the pursuit of appropriate educational
opportunities.3 While segregated placements outside the
mainstream were not prohibited, an individualized
education program (IEP) was required to strike a balance
between the default of inclusion and appropriate socio-
educational opportunities; wherever they may exist.14
In response to this public policy, Berne and
Steifel posed questions fundamental to the
administration of special education programs. These
researchers drew focus to the practice of normalization,
and reframed these issues into terms of school finance:
1. For whom are we trying to generate equality and
what is to be equalized?
2. Is the public policy focus on the equal
treatment of special education students, all
students, or on special education students in
relation to all other students?
3. Is the focus on taxpayers in terms of their
efforts to raise local funds, and their relative
ability to pay for special education services?
4. What exactly is to be equalized--dollars per
student (e.g., state aid), resources per student
(e.g., appropriate pupil/teacher ratios),
educational outputs (reading proficiency), or
life chances (e.g., access to future earning
5. What equity issues pertaining to special
education students and the types of services
they receive and the settings in which they
receive them, relate to special education
The answers to these questions determined the
approach and features of state special education funding
formulas.16 A funding formula was defined as the mandated
procedures, prorating provisions, administrative
guidelines, and exceptions or exclusions that determine
and regulate the allocation of state funds to
districts.'7 Although the IDEA broadly addressed costs,
the process was complicated by the special education
finance formula selected by each state and the goals
indicated in state statutory and constitutional law.
These particular goals have included objectives of
equity, local control of special education programs, and
efficiency of service delivery.18
Fiscal and Placement Neutrality and the LRE
In an effort to qualify the concerns raised by
Berne and Steifel, researchers have examined the
relationship between funding neutrality and the least
restrictive environment. Traditionally, fiscal
neutrality represented policy approaches that "focused
on freeing the tie between level of expenditures and
district property wealth rather than on the more
amorphous concept of need."19 In San Antonio School
District v. Rodriquez, the district court's panel
maintained the unconstitutionality of the Texas school
finance system and presented the first policy thrust of
fiscal neutrality.20
Placement neutrality was defined by the CSEF as
that which drives down the incentives between the
frequency of students identified and funding received.21
The CSEF also documented that the variation of special
education student need has remained relatively low and
the need for services was fairly constant throughout the
nation. Therefore, equitable outcomes for special
education programs have required policies that do not
purposely or inadvertently cause over-identification in
the pursuit of special education funds.23
McCarthy and Sage examined the importance of
funding neutrality at nineteen special education sites
throughout New York State.24 The study examined
population, needs, service delivery, governance
structure, resources, and system costs of special
education programs and how those variables influenced
equitable outcomes. The study demonstrated that local
economic and political conditions influenced these
factors. The respondents clearly indicated that there
was an inextricable relationship between the LRE and
placement neutrality. Furthermore, the authors found
that state and local funding methods influenced the
context of the least restrictive environment. The
federal concept of LRE has required shared and sound
placement decisions that were "least-hindering" for
children. However, this study identified a highly
subjective process of service delivery that was
"intensely dependent upon [administrative] value
judgment s [sic], especially when [determining] what was
adequate or appropriate in terms of funding."25
A similar study examined the costs associated with
the local level due-process hearing.26 This 1987 study
revealed that the original legislative intentions of
Congress evolved into a funding model that was less
sensitive to individual student needs. The study
examined eleven districts in Chicago that conducted due-
process hearings and the costs incurred by the Illinois
State Board of Education, special education
administrative units, local school districts, and
parents or guardians. With the assumption that special
education hearings reflected the address of individual
student needs, the authors conjectured that a small but
stable frequency of task similarities among these four
groups would reflect an individualized evaluation of the
special education program. In other words, a high degree
of task similarity among the four groups across
different impartial hearings indicated a highly
stratified system based on categorizing and
administrative classification. The authors identified
varying cost differences associated with a broad system
of administrative due-process tasks. These findings
suggested that impartial due-process hearings were not
as directly associated with individual student
differences (i.e., the federal ideal that reflects
equitable treatment) as they were with the needs of a
bureaucratic educational system.
Ysseldyke, Thurlow, Algozzine, and Nathan supported
Boscardin's findings that fiscal policy characteristics
affected program policy.27 The team examined the type of
forces that influenced open-enrollment placement
decisions among students with and without disabilities.
The authors determined that open-enrollment districts
were the ideal context to examine the relationship
between all student placements: there were relatively
fewer forces that inhibit the migration of students to
and from schools. The study identified and ranked the
most pervasive fiscal concerns for students with and
without disabilities. Data yielded a spectrum of issues
that influenced placement decisions in open-enrollment
districts. The study revealed coercive administrative
forces that inhibited open placement decisions for
students with disabilities. Data indicated that the
provision of services and programs were dictated by the
disabling category of the child and the geography of the
specific special education program, rather than the
particular educational needs of the individual child.
Other Measures of Finance Equity
Political issues relating to equity did not
singularly affect the consumers of special education
resources. Terms of equity also have been applied to the
taxpayer that has supported the broad range of services
for students with disabilities.28 One criterion
associated with tax equity was the benefit principle
that the measure of tax fairness was in proportion to an
individual's benefit and social responsibility to pay.29
Moreover, the benefit associated with a tax should
ideally "outweigh the unequal burden that may fall to
some persons."30 Thompson et al. described the evaluation
of this benefit as a subjective endeavor which
maintained that maintained civic interests before the
concept of individual proprietorship.3 In addition to
the benefit principle, tax equity was also measured in
terms of its exclusivity of application. Progressive,
regressive or proportional taxes--whether applied
uniformly or with adjustments for income level--were
evaluated with the financial status of the taxpayer in
mind.3 Thompson et al. noted that "regardless of the
political or economic logic, a tax is based on decisions
to accept or reject ability [to pay]."33 Tax equity was
evaluated further in terms of horizontal and vertical
measures. Absolute horizontal equity was predicated upon
the equal obligation of equals, where vertical equity
required administrative action to ensure the equal
obligation of unequal subjects.34 Whereas the strict
application of either horizontal or vertical tax equity
has created inequitable tax schemes, the modern trend of
tax theory has sought to provide a balance of both
vertices to equalize the economic disparity that exists
in contemporary society.35 Kelly summarized the legal
applications of balanced, or fiscally neutral,
approaches to tax equity:
The degree of a formula's horizontal equity
can be observed by comparing the per pupil
expenditures of the wealthiest and poorest
districts. Even though absolute equality of
expenditures is not possible, these new
systems must substantially narrow revenue gaps
to eliminate wealth-based allocations of
The relationship between the impact and incidence
refined the concept of tax equity. Taxes have targeted
subjects (e.g., impact), but policymakers have exerted
less administrative control over the subjects that
eventually pay the tax (e.g., incidence).3 For example,
administrative cost increases that were not value-added
but were associated with a "trickle-down" effect were
problems inherent to impact-incidence. The fifth
criterion of tax neutrality maintained that equitable
taxes will leave the same economic "footprint" across
the economic spectrum of taxpayers; neither depressing
the economy nor producing undue economic hardship on its
contributors.38 The final criterion related to the tax
certainty. This principle evaluated taxes that were
presumed, expected, and undeviatingly administrated.39
Within the context of these taxpayer equity issues,
Berne and Steifel40 asked the following:
1. What is the relationship between state and
federal special education revenue and overall
equity goals in school finance?
2. How should special education finance be
conceptualized within the larger context of
school finance policy?
3. To what extent do special education funds retain
their more categorical nature across the states,
and where are they more closely incorporated
with overall state education aid?
4. How large are the special education aid
allocations across states and what is the impact
of inclusion or omission of these equalization
Perhaps Congress addressed taxpayer equity concerns
most succinctly during the earliest drafts of Public Law
The long-range implications [of inadequate
education] are that taxpayers will spend many
billions of dollars over the lifetime of these
handicapped individuals simply to maintain
such persons as dependents on welfare and
often in institutions With proper
educational services, many of these
handicapped children would be able to become
productive members contributing to society
instead of being left to remain burdens on
Inclusion as Equity
Parrish responded to these critical inquiries by
initiating a discussion in "What is Fair: Special
Education and Finance Equity."42 Whether equal
opportunity was described as the LRE, equal access to
opportunity, or a FAPE, CSEF researchers have identified
inclusion as the chief modality of equity. Across the
spectrum of consumer and taxpayer equity issues, Parrish
identified the process of inclusion as a precondition of
equity.43 The inclusion of students with disabilities--
specifically placing students into general education
classrooms within the LRE--has represented the greater
share of policy debate in special education law.4
According to Parrish, inclusion policy provided a
natural political tension between taxpayer and client
perceptions of equity.4
Barriers to Equity
If the practical goal of public education were to
provide equal opportunity through inclusion, the
practices of exclusion and misclassification have served
to undermine it. Turnbull identified two degrees of
exclusion that have been employed to deny equal
educational opportunity to students with disabilities.
Exclusion has occurred when children were denied access
to educational opportunity, provided inadequate
education, or served unresponsively." Total exclusion
was a treatment of the student as though they did not
exist: these students were not admitted or excluded de
facto through waiting lists or unfair admission
practices.47 Functional exclusion implied access to an
educational program, but one that was "of such a nature
that the child could not substantially benefit from it
and therefore received few or none of the intended
benefits of education."4
The literature revealed many barriers that have
blocked students with disabilities from educational
opportunity.49 According to the court in Wolf v. Utah,
"The segregation of the disabled children from the
public school system can be and probably is
usually interpreted as denoting their inferiority."50
Just as the exclusion of students served to bar children
from equal educational opportunity, the manner in which
districts have classified students with disabilities has
contributed to inequity. According to Turnbull, such
errors have misplaced or inappropriately tracked
students in school programs.51 According to Kirp, the
relationship between exclusion and misclassification was
difficult to demonstrate because excluded children were
rarely located.52 Kirp's critique of special education
misclassification systems focused on the nature of
stigma in the processes of equal educational
opportunity. Kirp indicated that a stigma was not
intrinsically laden with value and that the stigmatizing
attribute was "neither creditable nor discreditable per
se."53 The value existed in the socially accepted meaning
of the label.54 Although stigma--in rational terms--was
sometimes legitimately imposed, large institutions have
exercised no control over the social stigmatization of
classified subjects."
Policy problems have arisen when subjects were
labeled in a manner that society regarded with less
value.56 Kirp identified three Constitutional flaws with
the present identification system. The exclusion of
"ineducable" students to ineffective special education
programs implied a denial of equal protection."5 Second,
the over-representation of some minority classes in
special education has implied "racially specific harmful
effects.""5 Finally, equal protection was indicated to
insulate children from the possibility of such
A survey of the literature revealed a history of
sparse funding for special education programs.6 Before
federal legislation monitored educational opportunity
for students with disabilities, school districts
pervasively and continuously failed to serve the
educational needs of children with disabilities by
attrition. 61 During hearings for the Education of the
Handicapped Amendments in 1975, it was reported that
1.75 children with disabilities were receiving no
special education services, and 2.5 million students
with disabilities were receiving an inappropriate
education.62 In 1977, the cumulative bill for federal,
state, and local special education expenditures was $1
billion as compared to an estimated $32 billion for
Federalism and Special Education
A full understanding of equal educational
opportunity warranted exposition on the role of the
federal government. Constitutional scholars have
identified two major principles involved in the concept
of federalism.6 First, the U.S. Constitution has
recognized a shared responsibility for public education
between the local, state, and federal governments. This
division of responsibility was exemplified in 1987-1988
school year expenditures for special education. The CSEF
reported that for the $9.3 billion total associated for
all special education expenditures in 1987-1988, about 8
percent was provided by the federal government, 56
percent was provided by the state government, and 36
percent provided by the local government.65 The greater
responsibility for the administration of state special
education programs was delegated to the local and state
governments. However, the consolidation of consent
decrees in the Education for All Handicapped Children
Act66 and U.S. Supreme Court cases have greatly impacted
the manner in which the three jurisdictions share
financial responsibilities.67
Constitutional and statutory law has endured with
supreme jurisdiction.68 As established by the U.S.
Supreme Court in 1803, the Constitution of the United
States and Congressional legislation were deemed the
ultimate law of the land.69 According to Alexander and
Alexander, the federal domain over the American public
educational regime has flowed from three sources: (a)
acquiescence by states and local governments in
acceptance of federal grants-in-aid; (b) the regulations
authorized under the Commerce Clause;70 and (c)
Constitutional decrees established by courts.7 The
federal responsibility for special education was also
affirmed by the state legislatures. This federal
jurisdiction and the enactment of the National Defense
Education Act of 1958 enabled Congress to exert control
over state special education regimes.7
Federalism and The General Welfare Clause
According to legal scholars Reynolds and Rosen,
"Federal legislation has been the single most
significant incident in the total history of special
education."73 Although scholars and historians have
debated the balance between federal authority and state
sovereignty, this literature review provided specific
exposition on the role of the federal government in the
education of students with disabilities. Article 1,
Section 8, of the Constitution--the General Welfare
Clause--has indirectly empowered the federal government
to "lay and collect taxes, duties, imposts and excises
to pay the debts and provide for the common defence
[sic] and general welfare of the United States ....74
Federal involvement in the public education was based
upon this clause.75 Although Congress had exerted an
indirectly persuasive force on the public educational
regime, its role was formally authorized by the United
States Constitution.76 The guiding role of the federal
government was upheld in U.S. v. Butler77 and Helvering
v. Davis.78 U.S. v. Overton affirmed the establishment of
a local/state partnership in the education of all
citizens, but it was not until 1919 that this
jurisdiction was formalized.7
The relationship between special education and the
federal government was grounded in terms of the
Fourteenth Amendment. This Constitutional provision
maintained that "no state may deny to any person within
its jurisdiction equal protection of the laws."80 Two
cases brought special education inequity into
Constitutional question. Brown v. Board of Education"8
established that a separate but equal educational system
with financial and social inequity was unconstitutional.
The court held in Pennsylvania Association for Retarded
Citizens (P.A.R.C.) v. Commonwealth of Pennsylvania82
that the legal doctrine of equal protection served the
class of students with disabilities as equally as it
served the class of racial minorities. This application
of Zero Reject created a nexus between special education
and equal protection.83 The legal principle maintained
that all children with identified special needs were to
be provided within the context of a FAPE.84 The
Fourteenth Amendment was utilized in Mills to (a)
prevent the total and partial exclusion of children with
disabilities and (b) protect the rights of students with
singular disabilities --like cerebral palsy--when
persons with multiple disabilities were included.8 Mills
applied equal protection broadly to all students; not to
a singular grouping of students.86 In contemporary terms,
the Zero Reject principle has also applied in a ruling
where students with disabilities were included rather
than excluded. In this instance, the legal principle was
applied when parents were held to the costs of tuition
when parents of non-disabled students were not.87
In other instances, Zero Reject refined the legal
doctrine of equal access.88 This application of the
P.A.R.C./Mills doctrine of equal protection required
appropriate opportunities to develop individual student
capabilities.89 Proponents of equal access have
maintained the maximization of educational opportunity
and highly individualized special education programs.90
Cases such as Board of Education v. Rowley91 and Tatro v.
Texas92 have continued to reframe this doctrine of equal
access. However, a ruling in Lau v. Nichols93 revealed
that the courts were hesitant to completely disregard
the equal protection theory initiated in Brown.
Many of the regulations outlined in Public Law 94-
142 were included in most state statutes by 1975.94 State
officials responded to these initiatives by accusing the
federal government of intrusion. In 1976, Illinois State
Superintendent J. Cronin suggested that the Education
for All Handicapped Children Act (EAHCA) was engaged in
a hostile takeover of the American educational system.9
Cronin responded to the perceived federal encroachment,
suggesting that the state and local governments should
press for legislative measures that would make the
federal initiative redundant.96 In 1977, Louisiana
Superintendent of Schools Daniel B. Taylor called the
EAHCA an "invasion of the constitutional and statutory
rights of State and local governments."" Taylor cited
local and state educational resources and personnel that
were to be "commandeered for federal purposes in Section
432 of the General Educational Provisions Act."98
Taylor's impressions of state sovereignty were not lost
on his colleagues of the Council of Chief State School
Officers. He addressed state's rights in an address to
this group:
People living in West Virginia ought to have a
right, as people of the United States, to
receive their fair share of federal funds
provided by the U.S. treasury for
helping handicapped citizens, and that this
right ought not to depend upon whether the
their State will also provide financial
assistance to them. For the U.S. Government to
place a State Government in the position of
having to spend its money out of its own
treasury on a federally assisted program--
particularly the lion's share of the money--in
order for its people to enjoy a benefit of
U.S. citizenship is questionable.99
The highest levels of the federal government also
indicated a similar reluctance. During this 1970s,
inflation was rampant, school enrollments were in
decline, and taxpayers were consistently defeating state
and local tax referenda.100 The most prevalent
bureaucratic concerns were of a fiscal nature.101 Perhaps
the greatest evidence of the political forces at work in
the mid-1970s was the obvious hesitation in President
Ford's Senate Bill 6 signing statement:
I have approved S.6, the "Education for All
Children Handicapped Act of 1975" .
Unfortunately, this bill promises more than
the Federal Government can deliver and its
good intentions could be thwarted by the many
unwise provisions it contains Despite
my strong support for full educational
opportunities for our handicapped children,
the funding levels in this bill will simply
not be possible if the Federal expenditures
are to be brought under control and a balanced
budget achieved over the next few years .
[The Act] contains a vast array of detailed,
complex, and costly administrative
requirements that would unnecessarily assert
Federal control over traditional State and
local Government functions. It establishes
complex requirements under which tax dollars
would be used to support administrative
paperwork and not educational programs.
Unfortunately, these requirements will remain
in effect even though the Congress
appropriates far less than the amounts
contemplated in S.6.102
Philosophical, Historical, and Statutory
Foundations of Special Education
A survey of the historical literature in special
education revealed an extended chronicle of equal
rights. The precedent for supplementary educational
programs for students with exceptionalities has outdated
the precedent for compulsory public education.103 From
1823 to 1927, twenty-seven federal acts established
relief for citizens with disabilities. 04
The first formal special education initiatives were
initiated in the early Nineteenth Century. In 1817,
Reverend Thomas Gallaudet founded the first documented
educational program for students with disabilities in
Connecticut."15 Six years later, Public Law 19-8
established the first state institutional school in
Kentucky. This legislation also expanded a federal land
grant program to establish a learning seminary for
persons with mental impairments in Florida.'0 Although
the federal government did not require state programs
and resources until the 1970s, P.L. 19-8 established the
historical precedent for specialized centers throughout
the union.107 In 1852, the state of Pennsylvania
allocated funds to provide educational services for a
group of children with developmental disabilities in a
private school.'08 The institutional service model that
was introduced in these land grant programs provided an
important administrative framework for another century.
During this period the intermingling of public and
private resources was often necessary: a unilateral
thrust for public special education programs would not
be in place until the 1950s.109
Federal Support for Gallaudet
The Lincoln Presidential Administration ushered the
federal government into its new role as ombudsman for
Americans with special needs. In 1857, a grassroots
effort arose to establish a small school for children
with special needs in the Chesapeake Bay area. At the
forefront of this movement was a Dartmouth-educated
journalist, D.C. Kendall. Kendall held several federal
government positions including Postmaster General during
the Jackson and Van Buren Administrations. With his
leadership, political clout, and private donations, the
steering committee of the Columbia Institution reported
an operating budget of approximately $6500 for FY
1858.110 In 1860, Kendall petitioned the Maryland
legislature for more funds and devised an expanded
curricular framework that doubled the enrollment to
thirty degree-seeking students. In 1864, the Lincoln
Administration took a crucial first step in its role as
advocate for students with special needs. The Lincoln
administration helped to accredit Gallaudet College as a
higher education institution for the deaf and hard of
hearing.1l Prior to these laws, the federal government
took no active role in support for special education
Special Education Programs at the Turn of the Century
A grassroots campaign for state and local special
education policy emerged in the latter part of the
nineteenth century. In 1869 and under political pressure
from parent groups, the city of Boston established the
first public day school for the education of students
with hearing impairments.13 At the turn of the century,
Chicago and the state of Rhode Island also established
public school centers for students with physical and
mental disabilities."1
Special education during the Industrial Revolution
was characterized by the use of the institutional models
of service delivery. Managers of large organizations
utilized the assessment and quantification of
individuals into skill units.n5 Contemporary management
styles reflected a premium concern for productivity and
efficiency. This ideal was often pursued at the cost of
individual liberties."6 As the social flux of migrant
labor to urban areas changed the face of corporate
organization, the government also established
institutions that adopted a similar categorical method
of labeling and classification of various
disabilities."7 This labeling served to "legitimize the
provision of differential legal, medical, residential,
economic, and socialization care."n" Cremins
characterized the use of labeling and categorical
tracking in governmental institutions as an efficient
means to contain costs and provide efficient service
delivery."9 At this point, state and federal governments
lacked the infrastructure and unified leadership to
provide a comprehensive plan for change.120 According to
Cremins, the federal government facilitated an "epoch of
neglect" in which the issues of the Industrial
Revolution overshadowed the needs of Americans with
disabilities.21 Furthermore, Cremins described a public
policy that possessed little flexibility to adapt to the
emerging grass roots initiatives.122
Regardless of the limitations of contemporary
disability policy, the early 1900s were crucial to the
evolution of many principles germane to federal special
education policy. In 1910, the White House held the
First Conference on Children that addressed contemporary
special education issues.23 Conference transition plans
presented programs to transfer institutionalized
children into permanent and segregated placements where
their needs could be met within the context of the
public school.124 During this period, educational
researchers identified the importance of the
individualized instruction of students with special
needs.125 Furthermore, special education practitioners
believed that the homogenous and smaller groupings of
these students would foster positive self-esteem and a
richer quality of life.126
Although placements in restrictive classes and
services increased from 1910 to 1930, the historical
literature revealed the categorical exclusion of
students in the mild to moderate range of disability.127
Whether these students dropped out, were expelled, or
deemed unteachablee," they remained effectively outside
of the purvey of contemporary special educational
The Emeraence of State Special Education Policy
This period was also characterized by the emergence
of state initiatives for the provision of services and
training.12 In this era, the state of New Jersey enacted
the first state mandate that required the provision for
programs for students with special needs.130 Although
these laws did not maintain the modern legal concept of
the LRE, this legislation evinced the first state
commitment to special education programs.
Many state initiatives arose to provide training
and professional development for a small pool of special
education instructors. In 1914, Charles S. Berry created
the first special educator training center at the Lapeer
State Home in Michigan."1 Consequently, Michigan State
Normal College became the first state to offer a special
education degree program.132 One year later, Minnesota
became the first state to pass special education
certification requirements that outlined a basis of
expertise in the emerging field of professional special
education.33 The cooperative model of service delivery
was established in 1919 in Pennsylvania to develop a
streamlined scheme for the efficient use of state
resources.134 The procurement of outside organization's
professional services has endured as a contemporary
model of service delivery.35
Early Special Education Programs and Exclusion
The emergence of special education programs did not
obscure formal legal precedents that were designed to
exclude students with disabilities. The historical
literature revealed that state special education
programs flourished within the context of highly
categorical and insulated environments.36 The literature
also revealed that there was no established nexus
between the separate and unequal learning environments
of disabled and non-disabled students and the associated
social and economic disparities.1 Turnbull concured:
The schools excluded school-aged handicapped
persons individually and as a class. They
admitted some but not all students with the
same disability. They inadequately funded
tuition-subsidy programs that would have
enabled families to purchase appropriate
education from alternate sources (such as the
private schools). When appropriate programs
were not available, the schools placed
handicapped pupils in special education
programs that were inappropriate for them.
When faced with a shortage of special
education programs, schools created waiting
lists for admission to the few available
programs, thus excluding many eligible
In Watson v. City of Cambridge,13 the Massachusetts
Supreme Judicial Court ruled that a child who was "weak
in mind .and unable to take ordinary, decent care
of himself" could be expelled from public school. The
court affirmed the authority of the school committee to
exercise the general charge of the school, and refused
to interfere in the judgment of that administrative
body. In 1893, the Wisconsin Supreme Court concurred
with the 1893 Massachusetts ruling, stating that the
presence of such children had a profoundly disturbing
effect on students and school staff and could be removed
for cosmetic purposes.140 In this case, the student
possessed normal cognitive functions, but suffered from
a condition that caused him to drool, spasm, and assume
"unnatural" body positions. On the grounds that the
student depressed the faculty, monopolized teacher
resources, and had a negative effect on overall school
discipline, the court found that it was in the best
interests of the school to recommend the exclusion of
the child.
The Emergence of Special Education Policy
The homecoming of wounded World War One veterans
prompted the establishment of rehabilitation programs
for Americans with disabilities. In 1918, Congress
passed the Vocational Rehabilitation Act"41 to foster the
training and vocational rehabilitation of veterans with
disabilities.142 The Smith-Fess Act of 1920 extended
these rehabilitative services to civilians.143 For the
first time in the Twentieth Century, quality of life
issues concerning Americans with disabilities were
forced upon state policymakers.'4 Schools also employed
standardized aptitude testing for the identification and
placement students into various performance levels.145
This system of classification, according to Kirp,
accorded with the educational administrator's need for
efficiency and categorical achievement categories.46 The
unilateral and discriminatory nature of student
classification would not be brought into full focus
until 1954 in Brown v. Board of Education.147 The
strategic categorization of special education students
expanded to present day.148
By 1939, state legislatures refined special
education pedagogy: state certification programs
identified a unified regimen of tools, understanding,
and strategies to manage the student with special
needs.149 According to Winzer, behavioral strategies were
well accepted in the school setting by 1930150 and the
field of educational psychology expanded the pedagogical
implications of intelligence and ability.'51 A critical
shortage of trained special educators contributed to the
public resistance of special education programs.152
According to Cremins, the Progressive Education Movement
led to "unplanned and heterogeneous" grouping of
students.153 This created the demise of special classes
and encouraged the placement of children with special
needs in regular classes where they were generally
ignored and neglected."54 Kirp reported that ability
grouping, special education assignment, and the
exclusion of ineducable children afforded school
districts the power to "ease the tasks of teachers and
administrators by restricting .. the ability among
students in a given classroom, and purportedly improving
student achievement." 55
Although the 1950s and 1960s were characterized by
an increase in parent and professional organizations,
state legislatures enacted laws that furthered the
exclusion of special needs students.'56 According to
Ballard, the percentages of students with special needs
served in public schools were 12 percent in 1948, 21
percent in 1963, and 38 percent in 1968.15 Prior to
1969, the North Carolina State Legislature imposed
criminal sanctions on parents who continued to "persist
in forcing [the] attendance" of a child with
disabilities after exclusion from a public school.158 The
Illinois Supreme Court held that the state compulsory
education laws did not predicate a waste of resources
for the "feeble minded .and mentally deficient"
who were unworthy of the typical instructional
environmental9" According to the historical literature,
state legislatures had many special education laws in
effect, but pursued the practice of exclusion where
necessary.160 By the mid-1970s, two states did not have
comprehensive special education laws that extended
coverage for all exceptionalities.16 The literature
revealed that, without an established nexus between the
concept of inclusion and equal protection, states
legislatures were not constitutionally bound to provide
appropriate services students with special needs.162 To
support this point, the Senate reported in 1975 that
"mandatory legislation, which has characteristically
lacked meaningful provisions for actual enforcement, has
proven to be of limited value."163 According to Turnbull,
the judicial reasoning prior to the Warren era held that
discriminatory governmental action violated the equal
protection clause.164
Open Federal Support for Special Education
It was not until 1954 that the federal government
began to take a more proactive role in the development
of special education programs. In this year, President
Eisenhower authorized the Cooperative Research Act165
that specifically identified the need for federal aid to
support appropriate educational opportunities for
students with disabilities.166 The Eisenhower
Administration also authorized two laws in September of
1958 that expanded resources for teacher training in
special education. The enactment of P.L. 85-926167 and
P.L. 85-905168 established grants to colleges and
universities and was expanded in 1963 to all fields of
special education.'"9 This period also included the
enactment of the National Defense Education Act
(NDEA).170 According to Ballard, this federal act was
crucial to the promotion of special education.171 This
fiscal commitment set a clear regulatory role for the
federal government.17 The NDEA also addressed the
duplication of educational services in other federal
initiatives."' Most importantly, this legislation
reinforced the concept of the national educational
In 1963, P.L. 88-164"17 created a Division of
Handicapped Youth in the United States Office of
Education."76 This office served as a clearinghouse for
research and information in the emerging field of
professional special education.177 This law also
identified a research thrust in educational research
that included early childhood special education,
learning theory of students with disabilities,
curriculum and materials development, and innovations in
teacher training.18
Congress formally addressed the issue of nationwide
special education programs during the 1966 amendments to
the Elementary and Secondary Education Act (ESEA).179
According to Cremins and Turnbull, this series of
amendments ensured the provision for nationwide special
education services.180 Turnbull indicated that these
amendments shaped the ESEA in order to stimulate the
state legislatures to develop adequate special education
resources and personnel."1 Testimony provided in the ad
hoc Subcommittee on the Education and Labor Committee
described federal special education programs that were
"minimal, fractionated, uncoordinated, and frequently
given a low priority in the educational community."12
Thereafter, Title IV to the ESEA created a system
of grants-in-aid to state educational agencies for the
supplementary costs associated with programs for
children with disabilities.83 This entitlement was the
forerunner of the Education of the Handicapped Act
(EHA)'84 and part B of the Individuals with Disabilities
Education Act (IDEA).185
The EHA was the first free-standing set of federal
statutes relating to special education.186 This
legislation served to streamline several special
education grant sources and provided a singular
administration of the growing pool of supplementary
funds.'87 The combination of state initiatives and the
court decisions in P.A.R.C. and Mills essentially
imposed "right to education" mandates upon the state
governments.'88 This series of dramatic change prompted
another fiscal expansion by the Education Amendments of
1974.189 These amendments enhanced due-process
provisions, clarified a fundamental issue relating to
the privacy of student records, created links for
collaborative and interagency planning, and accorded an
increase in financial assistance to states.190 According
to Jones, the acronym LRE appeared for the first time
within the text of a federal law.191 These amendments
were also important in that they first identified the
need for procedural safeguards relating to
identification, evaluation, and testing materials.'92
Within the text of this law, Congress cited the
practices of exclusion'93 and identified the national
interests inherent to special education. "
A survey of the federal initiatives in the early
1970s revealed that state educational agencies were not
effectively administering the letter federal law.195
According to testimony in the House Subcommittee on
Select Education and the Senate Subcommittee on the
Handicapped, only half of an estimated 8 million
children with disabilities were receiving a satisfactory
education.16 Despite the onset of the EAHCA and the EHA,
conditions grew even more dismal. As late as 1975, an
estimated 1.75 million students with disabilities were
categorically excluded from public schools and an
estimated 2.2 million students were placed in
inappropriate programs that did not suit their needs.197
The EHA required the provision of full educational
opportunities to all children with disabilities between
the ages of three and eighteen by September of 1978.
Congress eventually permitted the exclusion of certain
students if standing state statutes were inconsistent
with the age requirements.198 These inequitable
conditions set the stage for the nation's most
comprehensive and free-standing federal special
education initiative.99
The Individuals with Disabilities Education Act
The EAHCA was a permanent law that was not limited
by periodic reauthorization. Most federal laws
incorporated expiration dates.200 The EAHCA was a
consolidation of contemporary consent decrees, existing
state and federal statutes, and case law.20' The EAHCA
utilized a funding formula that permitted every state,
congressional district, and school district to qualify
for federal assistance.202 In 1990, the EAHCA was
significantly amended and retitled as The Individuals
with Disabilities Education Act (IDEA).203 Osbourne noted
that the IDEA created an enduring conceptual framework
for special education.20 In this revision of the EAHCA,
the law included a change of terms from handicapped to
persons with disabilities, a broadening of disability
qualifications and the development of transitional
services from school to work.205 By 1990, the IDEA
established the main principles associated with special
1. The least restrictive environment;206
2. Individualized educational programs;207
3. Provision of special education services;208 and
4. Due process.209
The IDEA established the provisions for a FAPE and
identified the specific obligations of the state
educational agencies.21
The IDEA represented the primary source of federal
aid to state and local special education programs for
students from birth to age twenty-one. The IDEA
authorized three state formula grant programs and
several discretionary grant programs.211 The Act utilized
a state grant-in-aid program (permanently authorized
under Part B) and required participating state
governments to furnish all children with disabilities a
FAPE in the least restrictive setting.212 A thoroughly
amended Part B of the IDEA strengthened Congress'
commitment to early childhood special education
programs.213 This series of amendments established
provisions to coordinate the services required for an
appropriate special education.
In addition to the basic state grants, Part B of
the IDEA also authorized preschool special education
programs.214 Included under this authority was grant-in-
aid funding to support elementary and secondary
education services for children ages five through
twenty-one and preschool grants for children with
disabilities, ages three through five. With the
exception of new programs aimed at early intervention
for infants and toddlers,215 Part B fiscal provisions
relating to this population of the Act have remained
relatively unchanged since 1975.216
Parts C through G authorized discretionary grant
programs that were designed to encourage appropriate
educational services for children with disabilities.217
These grant programs included recruitment services,
parent advocacy initiatives and services designed to
meet the needs of young employees with disabilities.21
Part H, a grant program for statewide early intervention
networks for infants and families, was authorized until
Recent Amendments to IDEA
Although Congress designated the IDEA as a
permanent funding plan under Part B, the Act has
undergone periodic refinement. 220 Two series of
amendments have taken place every four or five years to
coincide with the expiration of discretionary grants
under Parts C and D.221 Public Law 102-119222 reauthorized
infant and toddler intervention programs.223 These
amendments expanded the eligibility criteria for
preschoolers and provided increased funding for
transition between early childhood and preschool
In 1997, Public Law 105-17225 significantly amended
many provisions of the Individuals with Disabilities
Education Act. The amendments repealed section 203 of
the Elementary and Secondary Education Act of 1965 to
provide for coordination of school-wide programs. The
1997 amendments included provisions for legal mediation
to diminish (a) the adversarial nature of due-process
hearings, (b) the costs associated with frequent
hearings,226 and (c) restriction on relief for attorney's
fees during IEP meetings. These amendments required
charter schools to establish comparable special
education programs and provided equal access to local
IDEA funds as administered by the Local Educational
Administration (LEA).
The 1997 amendments also addressed the importance
of procedural safeguards and administrative flexibility
in the discipline of students with disabilities. These
provisions required a Manifestation Determination
Committee (MDC) to determine the relationship between a
student's disability and misconduct. Congress designed
this framework to administrate administration of uniform
codes of conduct. Under P.L. 105-17, the MDC assumed the
administrative power of a due-process hearing and the
collaborative nature of an IEP meeting.22
Federal Entitlement under P.L. 105-17
The 1997 amendments included fundamental changes to
the IDEA funding provisions. States with setting-
specific formulas were required to incorporate
identification neutral policies that affirmed the LRE
requirements of the IDEA.228 According to the CSEF, this
new demand required approximately one-quarter of state
legislatures to undergo significant procedural revision
of the contemporary special education finance
provisions.229 To a lesser extent, this new requirement
affected most states with subsidiary provisions based on
placement (i.e., finance provisions for students served
in separate schools, residential institutions,
categorical funding for special student
transportation) .23
The administrative doctrine of incidental benefit
maintained that special education personnel may work
with mainstreamed students only if special education
students receive the primary benefit of the activity.23
The 1997 amendments relaxed the existing federal
incidental benefit regulations. This new permitted non-
disabled students to receive benefits from special
education services provided for children with
disabilities. In the past, policy problems developed
when special education students were integrated into the
general education classroom. This educational setting
indicated the utilization of "team-teaching:" two or
more teachers providing instruction to students with and
without disabilities. According to Chambers, Parrish,
and Hikido, the legality of this doctrine was in
contention.232 If, for example, a general education
teacher provided an English lesson and the special
education teacher remediated an integrated group of
students, regular education students would receive
direct instruction from the IDEA-paid teacher. This
would be of primary benefit to all students and not an
indirect, incidental benefit. The newly amended
provision233 encouraged LEAs to affirm the LRE without
having to fear audit exceptions under the excess costs
or commingling of funds requirements.234 The amendments
also accounted State Educational Administration (SEA)
and Local Educational Administration (LEA) for certain
conditions of maintained financial effort. The newly
amended provisions required SEAs to provide for
financial effort without any reduction in support from
the previous year.23" This provision secured a basic
minimum fiscal commitment to the state special education
programs without any decrease in special education
Congress strengthened LEA spending flexibility by
permitting reduced expenditures to be utilized as
virtual local funds.36 With certain restrictions,237 the
revised IDEA permitted the use of Part B funds for
school-wide improvement programs under Title I of the
ESEA.238 The LEA was permitted to use between 1 percent
and 5 percent of its Part B funds to improve the
coordinated systems of collaboration for special
education programs.239
As in recent years, current sources of federal
special education dollars have flowed from two primary
sources: permanent state grants under Part B of the
IDEA, and limited discretionary grants under parts C and
D of the IDEA.240 The total federal Part B allocation
under the IDEA was divided by the national total of
special education students. This measure provided a
single average national allocation per identified
student. State allocations were determined by
multiplying the number of special education students
identified in the state under Part B by 40 percent of
the average per student allocation for that year. This
formula placed a federal funding limit of 12 percent of
the state's student population.241 Federal expenditures
were designed to be placement neutral: they were neither
calculated by classification nor educational setting.
Upon passage of the 1997 Amendments, Congress
placed a cap of $4.9 billion upon the current child-
count-formula.242 The CSEF extrapolated growth and
inflation rates for this provision and estimated that
implementation of the cap would occur between 1999 and
2005.243 When the $4.9 billion cap was reached, a census-
based formula went into effect that was based upon 85
percent of a state's population and a vertical
adjustment of 15 percent for poverty levels associated
with each state.244 To contain the growth of special
education programs and curb the effects of over-
identification, Congress also placed a 1.5 percent limit
on federal assistance increases for states.245 Congress
provided for a further adjustment of (a) adjustments for
inflation or (b) actual increases in federal funds.24
Supplementary sub-grants to LEAS were required in every
year that the state's allocation increased by more than
the rate of inflation over the prior year.247
These funds were utilized for systemic changes to
improve results for children with disabilities. State
legislatures were also assured under the new plan that
the level of funding received for the previous fiscal
year would not be decreased.248 The Supplement-not-
Supplant provisions of the law reinforced the
Congressional intention to assist states educational
agencies, but not to relieve the SEAs of their financial
obligations.249 Congress intended that federal funds
under Part B would be utilized to pay only the excess
costs directly related to the education of children with
Local educational agencies should not look to
this assistance as general revenues or
generalized assistance to mitigate their own
responsibilities with regard to providing a
free appropriate public education for all
handicapped children. The primary purpose of
funds under this Act is to assure all
handicapped children an appropriate
The IDEA also required that 75 percent of federal
funds must be appropriated to local school districts,251
and that 25 percent could be designated at the state
level for administrative purposes."2 Congress was
sensitive to the burdening bureaucracy of special
education programs and applied these measures to enhance
local flexibility.253 Therefore, Congress appropriated
only 5 percent of the state share for administrative
Federal Enforcement of the IDEA
Within the context of more than a century of
inequitable special education programs, the federal
government has maintained a constant scrutiny of the LEA
and SEA programs.2" State educational agencies were
required to submit applications for federal
supplementary assistance for special education programs
that were received by the U. S. Department of Education
(DOE).256 The Secretary of Education was empowered to
determine whether these state programs complied with
federal law. After the judgment revealed state program
deficiencies, the DOE maintained the power to (a) issue
an administrative complaint and (b) request a cease-and-
desist order. If the state program violated federal
regulations, the DOE maintained the power to initiate a
compliance agreement with a state.27 This arrangement
was designed to document infractions and provide for an
organized transition plan.
According to Weber, the DOE did not undertake many
affirmative efforts to bring attention to non-compliant
plans. However, the DOE maintained ongoing reviews of
state plans258 and conducted audits of the state use of
IDEA funds. The DOE and has maintained the power to
reclaim amounts that were deemed to be inappropriately
spent.25 This doctrine was upheld in federal when the
court required the Louisiana State Board of Education to
refund federal education monies despite the ruling that
the State Superintendent was responsible for the
misapplication of funds.260 However, the federal court
reversed a lower court decision that same year,261
finding that the California State Board of Education was
not liable for the balance of $1.2 million of federal
education dollars on the grounds that the impunity
transcended the issues identified in the notice of
hearing. According to Weber, the reclaimed amounts were
generally reduced for mitigating circumstances and
limited to (a) inaccurate direction from federal
agencies, (b) inappropriate courses of action precluded
by formal written inquiries, and (c) reasonable reliance
upon an existing court order.262
Although the federal government was empowered to
sanction non-compliant state special education plans,
the greater burden of program evaluation was delegated
to the SEA.263 The ultimate legal responsibility for
state special education programs was the responsibility
of the SEA.264 States have traditionally utilized a
series of audits to monitor, evaluate, and correct
incompatible applications of special education law.265
The audit format required SEA representatives to
directly monitor the local education program.266 Federal
representatives analyzed reported data and evaluated the
manner in which services were delivered and records were
kept.267 The courts have maintained that state
educational agencies were required to pursue other
measures if a history of ineffective state agency
monitoring was indicated.26" If a state has determined
that a local school district violated federal
requirements, federal statutes required the SEA to
withhold funds until the district acquiesced into full
compliance.26 This process indicated a notice to hearing
and the LEA was permitted to present evidence on its
behalf.270 With the exception of state education policies
that were in direct contention with state law,271 school
districts did not have the option to sue state or
federal agencies for adequate funding on behalf of a
FAPE.272 The courts have held that only parents can sue
for injunctive relief to correct non-compliant aspects
of a local special education program.2"' The courts have
allowed parents to obtain an injunction to enhance state
monitoring practices on the grounds that there was no
administrative recourse for matters such as inadequate
provision of instructional space.27 The state was also
bound by federal statutes to collect and report data on
the status of special education programs throughout the
The General Provisions Act permitted the federal
government to mandate state plans that monitor,
investigate, and attempt to resolve all formal
complaints that pertain to federally funded educational
programs. 27 In 1980, these provisions were consolidated
into the Education Department General Administrative
Regulations (EDGAR).277 As such, the regulations
permitted a period of sixty days to complete a site-
based investigation and resolve the issue.278 After this
period, states were permitted to submit complaints that
were issued to the DOE.279 The courts have maintained
that this process was necessary but not sufficient to
completely fulfill the state's obligations for a FAPE.280
The Fourth Circuit Court of Appeals upheld the SEAs
right to hearing during the formal grievance
procedure.281 In this ruling, the federal government
withheld $50 million in state IDEA funds from the
Virginia State Department of Education on the grounds
that discipline procedures ran contrary to the current
disciplinary requirements.282 The Virginia state statutes
allowed schools to expel special education students
regardless of the alleged manifestation of the student's
disabling condition. The court found that regardless of
violations, SEAs possess the ability to appeal under
In accordance with Title VI of the Civil Rights Act
of 1964,283 Title IX of the Education Amendments of
1972,284 and Section 504 of the Rehabilitation Act of
1974,28 the Office for Civil Rights (OCR) of the U.S.
Department of Education was empowered to terminate
funding for grantees in violation of federal law. A
formal hearing was permitted and the OCR established a
three month statute of limitations.28
Funding Formulas, Incentives, and Disincentives in
Special Education
Special education finance has traditionally
operated under the philosophical framework of excess
costs.27 Excess costs were defined as the total costs of
educating a special education student minus the costs to
educate a regular education student.288 The utilization
of separate funding structures (between special and
regular education) has fostered a less accurate measure
of excess costs.289 Cost increases in regular education
that have not necessarily applied to special services
were associated with a reduction of the excess cost
amount.290 For example, if general education received a
10 percent increase in school funds, measures of excess
cost would be misleading. If enrollments stayed the
same, that 10 percent increase would have reduced the
excess cost per student (e.g., by $400) and affected the
state aid share by $400,000. This hypothetical district
would have received fewer special education dollars even
though enrollment had not changed.
The evolution of special education law and finance
has encouraged educational administrators to refer to
excess costs in new ways.291 Supplemental costs were
identified as excess costs that were provided in
addition to the regular education program. Replacement
costs were, therefore, excess costs that were provided
instead of the regular education program. This shift in
terminology generalized to categorical programs that
were compensatory in nature. Furthermore, Hartman
referred to supplemental and replacement costs as less
punitive for LEA and SEA funding systems.292
Other research addressed the excess cost formula's
lack of predictability.29 These data indicated that less
restrictive service provision, such as inclusive
practices, were inhibited under the excess cost system.
Under the weighted formula--that favored the labeling of
students with disabilities--students were identified in
terms of full-time-equivalent (FTE) average daily
memberships. The overall effect was the crediting of
special education only for the time that students were
in special education programs. Naturally, this created a
fiscal incentive to maximize the percentage of time
students were in special education settings.
Vertical Adiustments to Special Education Funding
McLaughlin and Owings reported no significant
relationship between poverty and overall identification
rates.2 However, for students with learning
disabilities in certain years, they found a significant
negative relationship (-0.5) between the identification
rate and the percentage of students living in
impoverished conditions.29" These data suggested that
wealthy districts were more likely to identify high
percentages of students in the milder and more
subjective categories of disability.296 The authors
reported that the ability to manipulate state and
federal dollars for special education indicated flaws in
the local program rather than true differences in
educational need.
A survey of federal statutes revealed a wealth
adjustment on the basis of student poverty.297 The
current IDEA wealth adjustment was predicated upon the
finding that high concentrations of poverty were
associated with greater numbers of IDEA-eligible
children.298 Under the new IDEA provisions, high poverty
states received a larger proportion of Part B funds.299
Research by Chaikind, Danielson, and Brauen demonstrated
that concentrations of poverty were associated with at-
risk conditions that have, in turn, lead to increased
requirements for special education services.300 With this
adjustment, additional resources for special education
were applied in a preventive manner.
Incentives for Special Education Funding
A review of special education funding incentives
was essential to the policy evaluation of placement
neutrality. The CSEF contended that an incentive-free
funding program has not been realized.301 A funding
system was not characterized as a neutral mechanism for
the collection and distribution of revenues. Therefore,
these systems have maintained the potential to purposely
or inadvertently create policy incentives for certain
types of placement and program decisions.30
Parrish described two significant funding
incentives that affect policy and program decisions:
restrictiveness resulting from public aid differentials
and incentives for private placements.0"3 Restrictive
settings, while contraindicated by the doctrine of LRE,
were not prohibited under the IDEA's continuum of
services. However, state legislatures violated
placement neutrality by utilizing cost-based funding
practices without regard to individual student needs.305
Parrish described the problem:
Historically, cost-based funding systems have
been seen as strong bases for driving funding
differentials. The concept underlying this
type of system is that the amount of aid a
district receives for a student with special
needs should be directly related to the cost
of providing services for the student. Since
all categorical funding formulas have an
underlying cost rationale, many school finance
experts and policymakers have preferred
systems that differentiate funding amounts on
actual differences in the cost of services.306
Policy problems arose when school districts
inadvertently created incentives based on program cost
differentials. U.S. News and World Report indicated a
seminal example of this type of fiscal incentive for
restrictive placement. In 1993, Texas paid ten times the
average per-pupil expenditure for the instruction of
students with disabilities in separate classrooms.307
While the costs associated with these placements may be
indicated by such drastic adjustments, the result
indicated a policy conflict for the LRE: in 1993, Texas
mainstreamed five percent of its special education
Private special education placements have also
demonstrated fiscal placement bias.309 The CSEF has
reported that the incidence of private special education
placement varies from state to state.31 This variation,
according to Parrish, was determined by the political
base of the state and the role that private educational
placements play in the continuum of services.3" The
funding bias occurred when few factors precluded private
placement: the availability, acceptance, and histories
of preference for private placements have often
determined the degree to which the bias exists."3
Shapiro, Loeb, and Bowermaster illustrated this bias:
Cities like New Haven [Connecticut] actually
save money when they send students to out-of-
district schools, even though these schools
can cost the state more than $100,000 per
student, because the state picks up the bulk
of the cost.313
State policy preference for expensive private
placements has also degraded the school district's
ability to collaborate and serve individual student
needs.314 Policy research suggested that funding should
follow students--not placements--to the local districts
where "decisions were best made concerning private
versus public school program investments."315 McQuain
conducted legal and policy research that revealed
private placement decisions that were "always somewhat
subjective." Moreover, tuition payments to private
special education institutions were among the single
highest costs to a school district."3
The CSEF determined that fiscal incentives for
special education policies should be targeted and
addressed in federal and state legislative reform.3"
Hartman concurred, indicating that fiscal incentives
should not necessarily be avoided. Rather, these
incentives should be recognized to reward behavior
concurrent with the legislative intent of the IDEA, and
utilized to discourage the proliferation of unnecessary
special education placements. 18
Within the context of placement neutrality, Parrish
outlined several federal priorities that have empowered
state governments to legislate effective special
education finance programs.319 Several assertions were
made concerning the five basic state methods of
compensatory aid for special education programs. First,
education finance policy would affect local program
provision of funds because there were no incentive-free
financing systems. Furthermore, policy provisions should
support--or at least not obstruct--the core values
associated with the federal program and the
appropriations based on type of student placement offer
less flexibility for state and local educational
agencies.32 Finally, allocations based on less specific
criteria (e.g., total enrollment) have demonstrated the
most flexibility for state and local educational
Cost Analysis Methodoloaies
Policymakers have maintained the importance of
special education cost analysis. A general lack of
data,322 and the inaccuracy associated with traditional
excess cost systems323 have increased this awareness. For
this reason, a large division of the literature accorded
with various analytical approaches.
Cost Analysis and Special Education
A 1988 study conducted by Lewis, Bruininks, Thurlow
and McGrew was the first study to demonstrate the
applicability of special education benefit-cost
analysis.324 Historically, benefit-cost analysis was
thought to be an ineffective manner of determining the
intangible benefit associated with special education
programs.325 The field of special education traditionally
based the success of a program on the degree to which
significant moral, social, and educational values were
met. These broad ideals were considered immeasurable in
traditional economic terms. Furthermore, a benefit-cost
evaluation of special education was perceived as a moot
endeavor on the grounds that social mandates--such as
the IDEA--were required in spite of fiscal
inefficiency.36 These perceptions discouraged the
academic scrutiny of such monetary benefits.
The Lewis et al. study was an early application of
benefit-cost analysis in special education. Cost and
outcome data for twenty-eight high school students with
developmental disabilities were analyzed to determine
the degree to which special services matched their
resource costs. The results indicated that with
appropriately defined, measured, and valued costs and
benefits, the traditional framework of benefit-cost
analysis could be applied to special education. The
study design evaluated resource utilization in current
programs and simulated the outcomes associated with
policy alternatives.
With the established validity of formal benefit-
cost analysis in special education, Lewis, Bruininks,
and Thurlow conducted a three part evaluation of urban
special education programs for students with mental
retardation.32 In this series, the results indicated
that standardized units (i.e., hours of special
education service) facilitated an effective comparison
of cost analysis between school districts. Furthermore,
data indicated that representations of current state
reimbursement rates for special education do not
accurately reflect the burden of total costs assumed by
local districts. These rates tended to overstate the
degree of federal and state assistance to local schools.
Costs and Policy
In an evaluation of the Pennsylvania education
finance system, Hartman described the criteria for the
evaluation of special education.328 The author found that
wide differences in programs and services hindered state
special education policy. Additionally, the author
described an effective funding formula that which was
needs-based, streamlined, predictable from year to year,
logical, and cost effective."' Hartman suggested that
the expenditures associated with special education
should be stable and related to specific programmatic
and economic characteristics of the state. These costs
should also represent a shared and well-organized fiscal
partnership between the state and local school
Parrish concurred with these findings after 15
years of research.331 In this policy analysis, the CSEF
described an effective formula as one that was
identification neutral; that is, utilized programming
without fiscal regard to sheer numbers of students or
the stigma of labels.332 Furthermore, the CSEF found that
there should be a "clear and conceptual link" to the
general education finance program to serve the
unification and streamlining of state objectives of
equity for all students.333
Cost awareness of high-growth areas of special
education were a paramount policy concern for
policymakers and researchers.33 Lipsky, Kerzner and
Gartner recognized the fiscal policies that handicapped,
over-classified, and impersonalized students with high-
prevalence disabilities."' In a synthesis of ten years
of research, the authors found distinct trends in the
development of special education programs. First,
increased growth in mild to moderate learning
disabilities represented a function of political
pressure rather than student reality. This implied--as
the CESF concurred ten years later336--that subjective
placement of students into remediative programs
demonstrated a synergy when applied within the context
of biased funding practices. Second, funding practices
that discouraged prevention encouraged over-
classification and the functional exclusion of students
with disabilities. Finally, the authors drew upon ten
years of research that demonstrated that the goals of
the IDEA could not be met in separate fiscal systems.
This contention accorded with the "unified system"
initiatives indicated by other research in special
Many practical fiscal issues burden the "unified"
approach to systemic special education finance reform.
First, the allocation of personnel was usually the most
difficult item to reposition within a district's funding
schema.338 The greatest reported distinction between
inclusive and categorical systems was the lack of a
collegial instructional setting.339 The CSEF reported
that faculty and support personnel relating to the
objective of inclusion required significant professional
development. Transportation dilemmas also arose in an
inclusively funded setting. Transportation represented
an area that saved inclusive districts the most money,
but much of the benefit was realized over the long
term.340 Finally, the CSEF suggested that school
districts must commit to the full accessibility of
campus services and the physical plant.341 In this
respect, an inclusive setting with architectural
barriers that unduly impeded the welfare of students
with disabilities was still considered exclusionary.
Climate surveys from the CSEF demonstrated a
significant concern for district flexibility and the
stringent federal mandates of the IDEA.342 In short,
state and local administrators reported that they were
over-regulated and under-funded.343 State reforms tended
to be multifaceted and emphasized local flexibility.344
Three state reform initiatives that targeted local
flexibility also fostered a slight reduction in the
number of students identified for special education
service.34 Intensive collaboration innovated local
practice by utilizing special education resources in
regular education classrooms, fine-tuning the pre-
referral process, and eliminating any state connection
between funding and over-identification.346
In 1991, Hartman identified two primary methods
employed by state legislatures to contain the costs of
special education.347 Fiscal controls were identified as
policy caps on special education expenditures through
limitations of money to special education programs,
funding per student, or permissible excess cost
shares.34" Indirect approaches to fiscal controls
included the limitation of a percentage of the costs
supported by the state. These measures required cost-
effective program delivery based on a greater LEA
financial share. These methods amounted to a broad
effort to control the state's funding obligation and
pare costs. This resulted in the increased share of the
financial responsibility to local school districts,
where specific program decisions and political problems
were usually delegated.349
Hartman also described the strategic nature of
program controls. The author described impact limited
program characteristics, such as (a) eligible students,
(b) placement typologies, (c) distributions in low and
high cost placements, (d) personnel organization, and
(e) assistive technology and materials.350 These
approaches reflected precise adjustments to special
education budgets, directing the impact to specific
program components. According to Hartman, program
controls were clearly preferred over traditional fiscal
controls: they required policymakers to organize and
prioritize program goals. Furthermore, the more precise
the method of cost control, the easier it was to assess
the reliability and effectiveness of the outcomes.351
Hartman noted, however, that precision approaches to
cost control were subject to scrutiny by parent and
special interest groups who have a political interest in
the allocation of such resources.352
Evaluation of Funding Practices
The CSEF indicated in 1998 that the most recent
comprehensive data on national special education
expenditures were over a decade old.353 Since the
enactment of the IDEA, a review of the literature
revealed three comprehensive cost evaluations of the
national special education program: Rossmiller, Hale,
and Froereich (1970),354 Kakalik, Furry, Thomas, and
Carney (1981),355 and Moore, Strang, Schwartz, and
Braddock (1988).356
Rossmiller et al. examined state special education
expenditure growth in fifty states by comparing per
pupil expenditures of students with and without
disabilities in 1968 and 1969. These data suggested that
the average expenditure per special education student
increased at an average rate of 4.08 percent a year.3
The 1981 and 1988 surveys were organized into
expenditure ratios that presented special education
costs on a per pupil basis expressed in relation to
general education costs. This cost factor approach,
based on categorical and grade-level programs,
represented the most prevalent cost-per-student
The Kakalik et al. survey suggested that the cost
of educating a student with disabilities was, on the
average, 2.17 times the cost of educating a non-disabled
peer in general education. This cost-per-student
approach summarized all costs associated with categories
of special education and divided the total program costs
by the frequency of students served. According to
Chambers and Hartman, this research design was hindered
by the obscurity of highly disparate special education
program costs.359 The use of average costs also obscured
cost variances associated with educational need.360
The Moore et al. study--conducted seven years
later--indicated a higher expenditure ratio of 2.28. The
findings from these three studies revealed a steady
expansion in special education expenditures since 1968.
Furthermore, the Moore et al. study indicated a
financial shortcoming in the benefit-cost analysis of
student assessment. The authors reported that the
compounded cost of eligibility assessment was $1,206 per
student.361 Parrish and Verstegen responded to this
Assessment is an exercise with little or no
instructional benefit, and it is conceivable
that states actually lose money by
participating in the federal entitlement for
special education At the rate of about
$400 per year [per identified student] in
federal funds, the costs of the resulting
services will be borne by the state for any
number of years before any cost-benefit will
be realized from the receipt of federal
The CSEF augmented the findings of these three
studies and adjusted for inflation to derive a broader
picture of growth in special education since 1968.36
Parrish divided this increase over time segments and
extrapolated a higher increase (6.86 percent per year)
for the period of 1968-69 to 1977-78. The same
extrapolation process indicated a growth rate of 1.05
percent for the period of 1977-78 to 1985-86. In
adjusted terms, the expansion of costs was less
pronounced, but still implied a steady growth.
These approaches to special education cost analysis
revealed a significant shortcoming. According to
Chambers and Hartman, traditional cost analyses did not
account for the efficiencies associated with economies
of scale.364 The organizational efficiency of special
education programs varied throughout the nation. States
and district governments with more responsive special
education programs were generally more uniform and
utilized streamlined service delivery. A lump-sum index
of costs for highly variant programs may have masked
differences in the educational organization of programs
and obscured the accurate statistical inference of these
Singletary characterized first or second generation
cost analyses of special education.365 The first
generation related to cost data gathered by program and
expenditure function for each disability categories.366
Studies in this category developed cost indices that,
unlike per-pupil expenditure measures, permitted gross
comparisons to be made among and between districts, or
within a district over time.36" This research included a
meta-analysis that indicated wide variances of costs
across (a) disability categories and (b) districts
within states. These studies from the early 1970s
indicated the common use of weighted pupil, weighted
unit, or cost indices. Many state legislatures have
since departed from these methods that achieved "equal
access to educational practices" as supported in
Robinson v. Cahill.368
The second generation of cost evaluations dealt
with cost factors and the relationship to the quality of
special education programs.369 These studies investigated
cost discrepancies and the analysis of variance among
cost indices for similar target districts.370 These post-
Cahill studies examined the relationship of input to
quality. Synthesized data revealed the following trends:
1. A statistically significant relationship between
the rated quality of the special education
program and the breadth of programs offered by
the district;
2. No relationship between the rated quality of the
special education program and pupil-teacher
3. A significant relationship between the rated
quality of the special education program and the
level of teacher preparation/experience; and
4. Identifiable, qualitative factors such as
educational philosophy and district cohesion
were systematically related to the quality
ratings of the special education program.371
These first and second generation cost indices reflected
a trend throughout the legislative beginning of the IDEA
that encouraged the provision of equal access to wealth
and educational opportunity.72
Contemporary, post-P.A.R.C. cost analyses have
scrutinized the role of service delivery and
administrative design. Hagerty and Abramson reported no
significant difference in achievement gains between
resource (less restrictive) and self-contained (more
restrictive) special education settings.37 There was,
however, a $1500 difference in per-pupil cost. When pre-
and post-test scores were evaluated through the average
per-pupil expenditure (APPE), the authors found the
least restrictive setting of the resource (or pull-out)
room to be considerably more cost effective than more
restrictive settings.7
Tappe provided a hierarchical tabulation of special
education costs and presented discussion on the nature
of growing special education expenditures.375 The author
reported that special education enrollments increased
proportionally to federal and state special education
program expenses.376 Tappe recognized that personnel and
staffing requirements represented the largest sum of
increased expenditures, but offered the following
justifications for increased program costs:
1. Lower teacher/pupil ratios
2. Increased survivability of children with
disabilities through medical and therapeutic
3. The exodus of children with severe disabilities
from state institutions
4. Extended school services beyond the 180 day
school calendar
5. Rising costs associated with assistive and
therapeutic devices
6. Costs associated with intensive inclusion
7. Capital outlay increasing facility access for
students with disabilities
8. The proliferation of private special education
9. Personnel and administrative costs relating to
10. Specialized transportation services
11. Shifting of financial responsibility between
various state agencies
12. Increased frequency of student referrals from
general education
Major Court Cases Relating to Special Education Finance
Court decisions have contributed to the evolution
of special education policy. These decisions have served
to broaden federal, state, and local governmental
responsibilities for special education. Legal issues
derived from the body of court cases ranged from equal
protection under the law to the equitable distribution
of public special education funds. This review of
special education jurisprudence represented two distinct
strands: cases supporting the initial federal
involvement in special education policy and emerging
issues in special education finance.
Constitutional Foundations for FAPE
The Fourteenth Amendment was particularly germane
to a legal discussion of special education finance. The
literature indicated three accepted doctrines of equal
protection. Historically, Fourteenth Amendment
litigation evidenced a distinctive suspect class.377 This
class was defined as a distinct or remote minority group
that exhibited pervasive discrimination based on
immutable characteristics.378 This first classification
of equal protection, strict scrutiny, applied to the
highest of judicial imperatives; i.e, governmental
policies that discriminated or infringed upon
fundamental Constitutional rights.37 Fourteenth
Amendment litigation has also addressed the
institutional violations against a suspect class.380 A
population with disabilities has not constituted the
definition of a suspect class and only a handful of
courts have recognized the suspect or quasi-suspect
class of the disabled.38' However, the courts have held
that people with disabilities have met many--if not all-
-of the characteristics of the suspect class definition:
an immutable condition382 that evoke stigma and
stereotypes,383 and the status of a "discrete and insular
minority. 384
Rational relationship suits referred to laws or
policies that possessed only a logical connection to a
legitimate civic objective.385 This classification
presumed the constitutionality of the law in question,
and was addressed by judicial review only on the grounds
that it was "clearly wrong, a display of arbitrary
power, [and] not an exercise of judgment."386 The U.S.
Supreme Court has declined to recognize people with
disabilities as a true suspect class and applied the
rational relationship as a tool to examine allegedly
discriminatory acts.387
An intermediate level standard suit was exercised
in Plyler v. Doe38 as a measure to blend the perceived
leniency of rational basis and the stridency of strict
scrutiny. Intermediate measures were pursued to correct
substantial civil violations against a target
The legal doctrine of Zero Reject was described as
a direct manifestation of Fourteenth Amendment.390
According to Turnbull, the Equal Protection Clause
established the ground rules for federal protection of
students with disabilities.391 This provision stipulated
"No State shall make or enforce any law which
shall abridge the privileges or immunities of
citizens of the United States; nor shall any
State deprive any person of life, liberty, or
property, without due-process of law; nor deny
to any person within its jurisdiction the
equal protection of the laws."392 Legal
scholars have concurred that without the
Fourteenth Amendment, the federal government
would have little control over the
administration of special education
programs .
Courts have also addressed the Constitutional
importance of the substantive due-process provisions of
the Fifth and Fourteenth Amendments. Mills v. Board of
Education,394 and P.A.R.C.395 detailed the substantive
due-process aspects of a free and appropriate public
education (i.e., a meaningful education that prevented
the practice of functional exclusion). 3
Brown and Generalizations of Equal Protection
Brown v. Board of Education397 fundamentally changed
the role of the federal government in cases of equal
protection. In this decision, the U.S. Supreme Court
declared that segregated placements based upon race were
unconstitutional. The court stated:
We conclude that in the field of public
education the doctrine of 'separate but
unequal has no place. Separate educational
facilities were inherently unequal. Therefore
we hold that the Plaintiffs and others
similarly situated for whom the actions were
brought are, by reason of the segregation
complained of, were deprived of the equal
protection of the laws guaranteed by the
Fourteenth Amendment.398
This ruling reversed a previous decision in Plessy
v. Ferauson that justified the doctrine of sanctioned,
public segregation.399 According to Turnbull, the
judicial reasoning utilized in Brown would serve to
drive the series of disability-rights consent decrees of
the 1960s.400 These decrees were essentially forced
integration mandates; based on disabling condition
rather than race. The integrative spirit of Brown was
well suited for proponents of inclusion: the issues of
inclusion and admission were mutually exclusive to (a)
the administration of insular special education programs
and (b) the state of segregated schools in the 1960s.
According to legal scholars, the courts have mandated
changes in state special education programs, but
delegated the responsibility of systemic policy changes
to Congress.401 Alexander and Alexander described the
chief strategy of the Warren Supreme Court as that which
recognized the need for orderly progress toward the goal
of integrated schools, but within the context of
congressional authority.402 This meant that the court
would limit itself to minimum personal relief for the
plaintiffs in Brown, but left the task of legislating
detailed rules for implementing desegregation to
Congress.403 Ashmore concurred, stating that the Brown
ruling--which delegated the larger task of systemic
educational change to the federal government--affirmed
the inherently political nature of local school
P.A.R.C., Mills, and Equal Protection
Until the implementation of the EAHCA in 1975,
there existed a separate educational system of treatment
for people with disabilities. Prior to this legislation,
the legal doctrine of parents patriae, or the power of
the state to intervene upon the lives of people with
disabilities, fostered a separate legal status for such
individuals.405 Most importantly, the systematic practice
of exclusion was based upon the fallacy that people with
disabilities were inferior and incapable.406 In this
environment, the provision of a free and appropriate
educational opportunity for students with disabilities
was unclear and unprecedented.407
The dual system of education described in Brown
accorded with the segregation of students with
disabilities. The Warren Court identified the effects of
exclusion on minorities:
To separate them generates a feeling of
inferiority that may affect their
hearts and minds in a way unlikely ever to be
undone Segregation has a detrimental
effect upon children. The policy of separating
them is usually interpreted as denoting
The dual special education system was characterized by
the systematic exclusion of students and the
inappropriate utilization of educational methods and
placements.409 Furthermore, students with disabilities
were pervasively denied procedural due-process.41
A 1969 federal consent decree prompted a wave of
litigation that would significantly alter the letter of
federal and state law. Wolf v. Legislature411 maintained
that educational opportunity was a fundamental and a
most critical function of the government. This concept
drove the issue of special education into two critical
federal district court suits.
P.A.R.C.42 expanded the legal reasoning in Brown to
the segregative context of special education resources.
This decision sought to create a nexus between the race
suspect class of Brown and the immutable status of
citizens with disabilities. This case was followed by a
pair of concurrent consent decrees413 pursuant to 42
U.S.C. 1981 (Equal Rights under the Law)414 and 42
U.S.C. 1983 (Civil Action for the Deprivation of
Rights)415 on behalf of all excluded Pennsylvania
citizens with developmental disabilities. The case
called into question the classification scheme that was
utilized by the state that excluded students on the
basis of "uneducability," "untrainability," and
"excusability." The consent decrees affirmed that
persons with developmental disabilities were capable of
benefiting from a public education. Furthermore, the
federal district court held that the state was held
financially responsible for such a program that was (a)
appropriate to their capacity and (b) within the most
normalized setting. The court also found that the
state's tuition maintenance statute--which provided
tuition for private schools--was applicable to all
special education placements; that is, all children with
disabilities were entitled to the same private
educational benefits if they were deemed appropriate.
Mills v. D.C. Board of Education416 represented the
next logical step in special education finance
litigation. Mills extended the P.A.R.C. ruling to
require state responsibility for all disability
categories. The plaintiff successfully argued equal
protection for over 20,000 excluded children with
various disabilities. The District of Columbia School
Board acknowledged its legal responsibilities mandated
by P.A.R.C., but maintained that comprehensive special
education programs would create an undue financial
burden upon all school programs. The court concurred
with P.A.R.C. jurisprudence that the U.S. Constitution
and D.C. Code required the uniform provision of
educational programs for all students; including those
with disabilities. Furthermore, the court held that
existing funds were to be distributed in such a manner
that no child was entirely excluded, and that
educational shortcomings were not to shift to any
particular class of students. As a protective measure,
the court mandated the establishment of enhanced due-
process provisions excluded from a public school
Policy Responses from the P.A.R.C. and Mills Decisions
These two rulings initiated a series of equal
protection suits throughout the nation.417 By mid-1975,
the House of Representatives reported that over forty-
six suits were underway in twenty-eight states.418 With
the exception of Ohio and Mississippi, all state
educational agencies were--as of July 1, 1975--under
statutory or court mandates to provide full educational
opportunities for children with disabilities.19 Thomas
and Russo indicated that the plaintiffs in these cases
were very successful in clarifying and securing
appropriate special education programs.420
However, Turnbull,421 and Thomas and Russo422
reported that many school districts refused to comply on
the grounds that (a) the mandates caused undue financial
burdens, (b) special programs were underdeveloped, and
(c) staff capabilities, instructional materials, and
building facilities were inadequate. Many state
legislatures responded with ambiguous statutes that
provided for certain populations of students with
disabilities. These state policies forced parents--under
no promise of assessment or placement--to assume the
partial funding of special education services.42
Although the success of the litigants in P.A.R.C. and
Mills prompted many state legislatures to pass related
statutes for the provision of special education
programs, only seven states had comprehensive provisions
with sufficient guidelines for compliance and
substantive due-process.42
Early School Finance Litigation
Between 1968 and 1970, several U.S. Supreme Court
cases utilized the legal reasoning in Brown to draw
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