Financing Special Education: How Incentives Affect Special Education Services in Michigan's Public and Charter Schools

• In Event: 63.018 - Promising Scholarship in Education: Dissertation Fellows and Their Research

Abstract

Special education services are expensive and consume a significant portion of school district budgets (Harr, Parrish, & Chambers, 2008; Chambers, J., Shkolnik, J. & Pérez, M., 2002). In an ideal world, decisions about whether a student requires special education and the nature of the services provided would be made apart from financial considerations. Empirical work suggests, however, that financial and other incentives embedded in state financing systems can play a role in the administration of special education services (Dhuey & Lipscomb, 2011; Mahitivanichcha & Parrish, 2005).
Michigan provides a unique opportunity to study special education in detail, through the state’s collection of district level special education cost data used for state reimbursement. In Michigan, there are clear financial incentives associated with special education. The state financing system covers only a portion of special education expenses (Arsen &Ray, 2004; CRC, 2011) resulting in the need for every district to subsidize special education from district revenues intended for general education. Called cross-subsidization or encroachment by economists, this may influence how districts identify special education students and provide services. Research on the response to incentives has suggested that districts reduce identification of special education students and provide fewer services when the price for special education increases (Dhuey & Lipscomb, 2011; Kwak, 2010; Battisti, Friesen and Hickey, 2012; Cullen, 2003), a pattern predicted with the presence of cross-subsidization. Existing research has looked for cross-subsidization (Parrish, 2001; Cullen, 1997) within state funding systems, but has not examined the district response in the presence of cross-subsidization. The first part of this study will identify cross-subsidization in Michigan, and seek to illuminate how the cross-subsidization incentive affects the delivery of special education in the state.

Author

• Margaret C. Jalilevand, Michigan State University