As New Jersey school districts finalize their 2025-2026 budgets, one line item looms large: the cost of special education services for students covered by the federal law called the Individuals with Disabilities Education Act (IDEA). Under both state and federal law, school districts are required to provide students deemed eligible for special education services with a “free and public education” in the “least restrictive environment.” 

This is as it should be: After all, IDEA was modeled after civil rights law.  But there is no getting around that it is expensive. How do local New Jersey school districts allocate money for the approximately 240,000 Garden State students eligible for services, 17.6% of total K-12 enrollment? 

First, a disclosure: My youngest child has multiple disabilities. Our local district, per state law, was responsible for his education from age 3 to age 21 and for a decade paid for him to attend a state-approved private special education school where tuition currently runs just under $90,000 a year, plus transportation. He then attended in-district programs, which might have been a tiny bit cheaper but not much once you accounted for therapies and aides.

One can argue about the return on investment (his parents note that at his first public placement his teacher said he’d never speak and now you can’t shut the kid up) but that’s irrelevant: New Jersey, like all states, is legally required to not only pay the costs for an appropriate education but to also make sure, according to a 2017 Supreme Court ruling, that education goals for students with disabilities be “appropriately ambitious.”

The problem comes with our special education funding formula which leaves local districts at the mercy of a “census-based” annual allocation (more on that below) that overcompensates some districts and undercompensates others. 

Here are some questions and answers to common questions about how NJ funds the costs of educating students with disabilities.

How much money are we talking about?

In 2009 the NJ School Boards Association estimated that the annual cost of special education was $3.5 billion. That was 16 years ago and now it is a great deal more. One group estimates the increase at 44%, which would put the total over $5 billion per year.

More than half of that is paid for by local districts and depends largely on the type of disability/ies and the services required, which are outlined in an Individualized Education Plan (IEP) crafted by parents and education specialists. Increasingly — due largely to costs but also in the spirit of “least restrictive environment” which means placement, at least some of the time, with typical peers — districts have created their own in-district programs that can serve these children.  While 17.6% of NJ students are classified, districts spend about 24-26% of total instructional spending on in-district special education services. 

According to the most recent data from 2022 on types of disabilities, 32% of classified students have specific learning disabilities, 23% have speech/language impairments, and 11% have autism. Other less common classifications include hearing and vision impairments, health impairments, emotional regulation impairment, and traumatic brain injury. 

What about students who can’t be educated in district schools?

While this 17.6% classification rate may seem relatively high (nationally the percentage of classified students is 15%), this percentage is only part of the picture. Our infrastructure – 600 school districts, some tiny — precludes fiscally sustainable in-district programs and has led to an industry of private special education schools which serve students with more severe disabilities.  (They are represented by an excellent association called ASAH.) According to state and federal law, local districts are responsible for private school tuition plus transportation for students eligible for special education when their needs can’t be met in-district.

Some of the private schools with the largest tuition rates serve students with “high-cost” disabilities like severe autism, according to the NJ Department of Education’s list of approved tuition rates for private special education schools. For instance, the Somerset Hills Learning Institute has an approved rate of $834.87 a day, or  $175,322.70 a year plus transportation. (Many of these autism-specific schools use a practice called Applied Behavior Analysis. Here is a deep dive into whether it is clinically effective.)

Then there is Lakewood, anomalous but still illustrative, where the budget is underwater because, in addition to 4,500 in-district students, the district is responsible for special education and transportation costs for 50,000 private school students. One example: Each year the district sends over 200 students to the School for Hidden Intelligence, which has an approved tuition rate of $160,790 per year. (According to school board agendas, more often than not the district also pays for a one-on-one aid at $200 a day.) The most recent data from the Department of Education documents that  last year Lakewood paid  $60.2 million for tuition to private special education schools and $47.5 million for transporting non-public students out of a total operating budget of $264 million. 

[Worth noting: These tuition rates are somewhat inflated because they include costs of social security, health care benefits, and retirement benefits that aren’t included in public districts’ tuition rates.]

How does this work with school district budgets?

Not very well, say a large number of special education advocates and organizations, from Education Law Center to the NJ School Boards Association.

This is because back in 2008, when the New Jersey State Legislature passed the School Funding Reform Act, special education funding moved to a “census-based model.” Instead of counting how many students were classified as eligible for special education services and differentiating aid based on the nature of the disability— some thought this was leading districts to over-classify students—the state uses a percentage of 15.9%  for all districts. Then it calculates the “statewide average excess” over the cost of educating a non-disabled students. In 2023 the statewide average excess was $19,524 regardless of the type of disability or the child’s needs.

According to a report from Education Law Center, in 2022-23 “60% of school districts were funded for fewer special education students than they enrolled, a 12 percentage point increase from 2009-10, the year after the transition to census funding.”

In a 2023 Senate Education Committee meeting Senator Vin Gopal noted,  “districts get the same aid whether they have large populations of students with disabilities or not, and regardless of whether they are spending as much as they should or providing the special education their students need.”

Currently a census-based model is used by only 13 states.

Apart from the census-based revenue stream, what are other ways local districts can access money to pay for special education services?

In addition to a small amount of revenue from Medicaid, state funding law compensates districts through a line item called “Extraordinary Aid,” which applies to students whose instruction and support (therapies, accommodations) cost more than $40,000 per year. In order to incentivize placing students in that “least restrictive environment,” compensation is higher when these students are educated in a typical school. In this case the district gets 90% of that excess over $40K. If they’re educated in a district school that only serves students with disabilities (not too many in NJ) the district gets 75% of the excess over $40K. If a student is placed in a state-approved private special education school, the bar for Extraordinary Aid is higher:  when costs go above $55,000 per year, the state pays 75%.

But is it equitable to incentivize in the first place? NJ Common Ground quotes John Mulholland of ASAH: “The funding and accounting system for all placements, public and private, should be the same and it should be placement neutral. That way, IEP teams can make decisions about what is right for a student, not what is right for the local budget.”

Last year the state budget provided 71.7% of the total reimbursement districts would be entitled to. Extraordinary Aid has never been fully-funded; last year Governor Murphy kept the allocation flat from the previous year.

Is there consensus on what NJ can do better?

Disability advocates (and some legislators) have urged NJ to switch back to a special education funding formula based on actual numbers. Common Ground notes that classification rates among districts vary wildly, with some reporting less than 10% and others more than 30%. Also the census-based “funding scheme” has not decreased classification rates or costs. 

Last month a bill passed the NJ Senate Education Committee that would establish a Special Education Funding Review Task Force “for the purpose of assessing the effectiveness of State aid provided to support special education costs, examining the possibility of a tier-based model for special education funding, and making recommendations regarding the implementation of a tier-based funding model.”

In other words, the way we used to do it.

Explainer: How Are Schools Funded in New Jersey, and Why Are My Property Taxes So High?