The 2021-22 Budget: Special Education Proposals

analysis full gutter The 2021-22 Budget: Special Education Proposals FEBRUARY 2021 SPECIAL EDUCATION PRESCHOOL serve—$9,010 per child. Districts were not required to use these funds for additional services. Thus, funds were likely used to cover the cost of existing Background preschool services. State Provides Most Special Education Funding Based on Overall K-12 Student Governor’s Proposal Attendance. The state allocates most special Provides $300 Million Ongoing Proposition 98 education funding through a base rate formula for Special Education Preschool. The Governor’s commonly called AB 602 (after its enacting budget includes $300 million ongoing to be legislation). The formula distributes funding based allocated to districts based on the number of on overall K-12 student attendance to Special preschool-aged children with disabilities residing in Education Local Plan Areas (SELPAs)—typically the district. Similar to the preschool funds provided a regional consortium of education entities that in 2019-20, there are no restrictions on this coordinate special education services. Large funding. Rather, the Governor intends this funding districts often serve as their own SELPA. to (1) supplement existing services, (2) promote Schools Serve Preschoolers With Disabilities inclusive practices, and (3) cover early intervention Using Local General Purpose or K-12 Special services provided both within and outside of special Education Funding. Federal law requires school education. districts to begin providing special education services to all children with disabilities upon Assessment their third birthday. Despite this requirement, Different Approach for Preschool Further the state historically has not provided special Complicates Special Education Funding. education funding for three- and four-year olds. Given the requirements for districts to serve As a result, districts commonly fund services for preschool-aged children with disabilities under preschool-aged children with unrestricted local federal law, we think providing ongoing state general purpose funding (primarily from the Local funding for this group of children is reasonable. Control Funding Formula) or state funding for K-12 The Governor’s approach to funding preschool special education. Preschool-aged children with special education, however, is inconsistent with disabilities can be served alongside other children how the state provides most special education with special needs or in more inclusive settings funding. Allocating the funding to a different set alongside children without disabilities, such as the of entities (districts instead of SELPAs) and using federal Head Start Program or the California State a different allocation formula (number of children Preschool Program. with disabilities instead of overall attendance) 2019-20 Budget Package Provided would add unnecessary complexity to the state’s $493 Million One-Time Funding for Special special education funding system. Furthermore, the Education Preschool. The 2019-20 budget was program would complicate regional coordination the first time the state provided funding for special of services through SELPAs. Many smaller districts education services for preschool-aged children. coordinate special education services—including Specifically, the budget provided $493 million in preschool-aged programs—with other districts in one-time funding to districts based on the number their SELPA. Allocating preschool funding directly to of preschool-aged children with disabilities they 2021-22 LAO Budget Series 1 analysis full gutter districts would create additional barriers for pooling 27 percent of California’s preschool-aged children funding to coordinate these regional services. with disabilities attended an inclusive program Proposal Could Increase Special Education for at least ten hours a week, compared to Identification Rates. Although the proposal 60 percent nationally. Special education preschool could help encourage schools to provide services administrators we spoke to cited challenges to students at an earlier age, providing funding finding inclusive settings for their preschoolers based on the number of children identified with a with disabilities. The existing options for inclusion, disability could introduce a new financial incentive such as the State Preschool program, often have to over-identify children for special education. program regulations and requirements that can This is a key distinction from the state’s base make it difficult to accommodate children with special education formula, which was developed disabilities. For instance, a State Preschool program with the intent to eliminate any fiscal benefits to may not be licensed to serve children with behavior over-identification. California law requires districts or cognitive challenges. Administrators also to re-evaluate a child’s need for special education reported that preschool staff often lack the expertise prior to entering kindergarten. Nonetheless, the to address the specific needs of students with Legislature will want to consider the long-term disabilities. For early intervention, districts may face effects of creating such a financial incentive. This challenges finding and identifying preschool-aged incentive may be most likely to affect how districts children with disabilities, especially if the child does address borderline cases, such as a three-year not attend a preschool program where they could old with slow speech development, where it may be referred for special education services. be difficult to determine whether the child needs Recommendations special intervention to catch up to peers. Impact of Funding Would Be Unclear Due to Provide Funding for Preschoolers Through Lack of Restrictions and Accountability. Even Existing Special Education Base Formula. To though the Governor’s proposal includes intent align with how the state primarily funds special language that funding be used for certain activities education, we recommend the Legislature expand beyond special education, there are no statutory the existing special education base formula to restrictions on this funding to ensure that this is in include ongoing funding for preschool-aged fact achieved. Districts would have broad discretion children. Expanding the base formula would allow over how closely to follow the intent language, the state to recognize local costs associated and spending decisions would likely vary across with serving this age group, while avoiding the the state. Some districts could use the funding additional challenges introduced by the Governor’s to cover existing special education preschool proposal. Specifically, we recommend modifying services, whereas other districts could provide new the special education base formula to double-count early intervention services to a broader group of kindergarten attendance for school districts. This preschoolers, as specified in the intent language. approach effectively uses kindergarten attendance Without any spending restrictions or accountability as a proxy for preschool attendance, since most measures, the Legislature would be unable to preschool-aged students do not attend programs determine the impact of the funding, and the extent in public schools. We estimate this approach would to which additional state efforts to promote inclusion cost around $255 million for 2021-22, freeing and early intervention may be warranted. up about $45 million relative to the Governor’s proposal. Proposal Does Not Address Current Challenges With Inclusion or Early Intervention. Explore Opportunities to Promote Inclusive Although the Governor’s proposal allows the Practices and Early Intervention. With the additional funding to be used for inclusion and early remaining $45 million, the Legislature could intervention, it does not address the underlying consider other ways to promote inclusive practices barriers that exist for schools. California has a and early intervention. For instance, the Legislature relatively low rate of inclusion for its preschool-aged could expand existing initiatives that provide students with disabilities. In 2018-19, only districts technical assistance to implement inclusive 2021-22 LAO Budget Series 2 analysis full gutter practices or support coordinated efforts for early collaboration between CDE and DHCS, challenging identification and intervention. documentation and billing system requirements, a high share of claims being disallowed, and limited MEDI-CAL BILLING state-led training and support. Governor’s Proposal Background Provides $5.3 Million Proposition 98 for California Has Low Participation in the Medi-Cal Billing Professional Learning. The School-Based Medi-Cal Billing Program. Schools Governor’s budget provides $5 million one-time have the option to seek partial reimbursement for CDE to select two or more school districts or for some health-related services from Medi-Cal— county offices of education to convene professional the state’s health care program for low-income learning networks and share best practices on the residents—through the school-based Medi-Cal Medi-Cal billing program. The Governor’s budget billing program. Because Medi-Cal is jointly funded also provides $250,000 ongoing to designate a by the state and federal government, greater district or county office of education to provide participation from schools allows the state to bring technical assistance on Medi-Cal billing as part of in additional federal funds. Eligible services through the statewide system of support. the Medi-Cal billing program include counseling, occupational therapy, speech therapy, and Assessment transportation related to these services. Previously, Given Upcoming Work Group schools were primarily eligible to be reimbursed Recommendations, Medi-Cal Billing for services provided to students receiving special Proposals Are Premature. The final work group education who also were enrolled in Medi-Cal. recommendations expected in October will likely A recent program change approved April 2020, include a set of policy changes aimed at increasing however, expands coverage to include all Medi-Cal access and participation in the Medi-Cal billing enrolled students. Low participation has been a program. It is unclear whether the Governor’s longstanding issue, as only about half of California’s proposals would be an effective complement school districts participate in the Medi-Cal billing to these recommendations. For instance, the program. A recent analysis by WestEd showed interim report highlights that DHCS has limited that California received a low rate of federal staff designated to the Medi-Cal billing program, reimbursement per Medi-Cal enrolled student in and CDE has no formal role in providing technical 2014-15 compared to other states—suggesting assistance. Given the complexity of program substantial opportunities to draw down additional requirements and the recent expansion to include federal funds. all Medi-Cal enrolled students, having a state-level 2019-20 Budget Package Established the agency providing technical assistance may better Medi-Cal Billing Work Group. In response to address the needs of schools. low participation in the school-based Medi-Cal billing program, the 2019-20 budget package Recommendation provided $500,000 one-time General Fund for Reassess Medi-Cal Billing Proposals the California Department of Education (CDE) Next Year in Coordination With Work Group to convene two interagency work groups—one Recommendations. Given the considerations of which was to focus on Medi-Cal billing and discussed above, we recommend the Legislature include the Department of Health Care Services reassess the Medi-Cal billing proposals as part (DHCS). The work group is tasked with providing of the 2022-23 budget process, after it has recommendations to the Legislature, by October 1, an opportunity to review the final work group 2021, to improve access to the Medi-Cal billing recommendations. This approach would ensure program. The work group’s interim report released in additional state funding is provided in a manner October 2020 identified several barriers to program most likely to improve program participation. participation, including the lack of interagency 2021-22 LAO Budget Series 3 analysis full gutter LAO Publications This report was prepared by Amy Li, and reviewed by Edgar Cabral and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. 2021-22 LAO Budget Series 4