School districts throughout Minnesota have spent years dealing with a delicate issue: an obligation to help pay for the needs of their resident special education students who opt to enroll in charter schools.
The issue boiled over in Duluth last fall, when Duluth school district leaders characterized Duluth Edison Charter Schools as a major contributor to the district's multimillion dollar deficit. Duluth Edison fired back, accusing the district of using it as a scapegoat for a wider range of financial problems.
The federal and state governments cover a portion of special education funding, but leave school districts to cover 90 percent of what remains, regardless of where their resident students enroll.
At Duluth Edison, the unreimbursed portion was $2 million in 2016, or a little less than one-third of its entire special education budget, which addresses many different needs. Students in the United States receive services at school for hearing, vision, speech and physical impairments, learning disabilities, developmental delays, autism and behavior and emotional disorders.
The amount caught the district by surprise, Superintendent Bill Gronseth said, because it was more than typical. And that meant more money needed to come from the district's general fund to pay that bill.
Gronseth, like superintendents across Minnesota, contends that the government needs to step up and provide schools with more special education money. The issue is so often a part of school budget discussions that more than half of the state's school districts - including Duluth, Hermantown and Cloquet - have passed resolutions asking the federal government to increase funding and for the state to study the issue in-depth.
This month, Duluth School Board members and others went to the Minnesota Capitol to lobby for reform, and it appears they're being heard. Bills are moving through the state Legislature that involve forming task forces to study special education delivery and costs, and Gov. Mark Dayton has included $17 million for special education in his supplemental budget bill.
Current funding, Gronseth said, "forces us to make reductions in other areas. It affects our class size, program offerings - any of the items we are talking about in making reductions."
Duluth would be paying for the services of its students regardless if they were enrolled with the district and not Edison - but then the district would be able to control costs and ensure efficiency, Gronseth said. Edison says it's following federal law, doing what it thinks is necessary to give its students what they need.
Edison's special education coordinator Rachel Komarek said her role is to allocate resources, so spending decisions fall to her.
"I ask, does the student need this in order to have a free and appropriate public education? If the answer is yes, we have to provide it," she said.
A complicated issue
In a News Tribune analysis of more than two dozen districts and charters in the region and throughout the state, Edison was one of the highest spenders per student in 2016. It averaged about $26,000 per student, based on the official Dec. 1 special education headcount - although school officials say they served 44 additional students that school year. That brings the average to about $22,000.
The Duluth district averaged about $15,500 per student. The Greenway school district, which more closely resembles Edison enrollment-wise, averaged $17,726.
Costs vary depending on the needs of students and how services are allocated. It's difficult to compare the traditional Duluth school district - which serves kids from birth to age 21 and includes residential sites - to Edison's K-8 model.
Nearly a quarter of Edison's special education students spend 60 percent or more of their day within a special education setting, which costs more money. About 17 percent of Duluth's students are in that category.
A common perception of the charter is that many of its special education students have a dedicated full-time paraprofessional. In reality, Komarek said, in 2016 Edison employed the full-time equivalent of just under seven for the 256 students it served.
Komarek also said that 20 percent of its special education students came to Duluth Edison in 2016 with individualized education plans - which lay out the needs of a special education student and services deemed necessary - already in hand. That means services had been decided elsewhere.
Duluth, like many school districts, pays for the unreimbursed special education costs of its kids enrolled in a variety of other educational settings, including other districts, and charter and private schools. But Edison is of particular concern, Gronseth has said, because the district isn't involved in allocating resources. At private schools, district employees provide the services, so they're a part of planning. And other public school districts, Gronseth said, are watching costs the same way Duluth is.
Duluth in 2016 spent a total of $3 million for special education services provided elsewhere, and received $1.9 million for the services it provided for kids who enrolled in Duluth from elsewhere. That was the first year the district didn't have a positive outcome, which it attributes to a state special education funding formula change that went into effect in 2016, and an increase in expenses from Edison. Under the new formula, Gronseth said, the district expects to see a negative balance every year going forward.
For Edison alone, Duluth paid $1.4 million in 2014, $1.6 million in 2015, $2 million in 2016 and is preliminarily set to pay $2 million for 2017.
Gronseth in December, however, overstated the district's expenses for Edison, citing a number much larger than the actual $400,000 increase from 2015. The $1 million shortfall he cited included the overall increase in what the district paid for all of its students receiving special education services elsewhere. In 2016, Duluth paid for services provided to its students enrolled in 43 other educational entities, although Edison by far gets the largest chunk.
Not enough money
Special education expenses are an issue throughout the state. Proponents of both charters and traditional schools say the problem is rooted firmly in federal and state governments' refusal to fund special education to necessary levels.
The school board resolutions passed in recent months demanding increases in state and federal funding point to the millions of dollars yanked out of general funds every year to cover remaining costs for state and federally-mandated services. It's called the cross subsidy. Statewide, that number was $679 million in 2016. The Duluth school district's was $9 million that year.
"It's a huge issue for school districts across the state, from metro to rural," said Kimberley Dunn Lewis, who works in government relations for the Minnesota School Boards Association. "More kids have IEPs than ever before ... and there is a higher cost for (special education)."
Some school districts are lobbying for change on several points:
• how much charter and other schools contribute to unreimbursed special education costs
• the special education funding formula itself
• the creation of a task force to study impacts, mandates, costs and delivery of special education
• a say in the allocation of resources for district kids enrolled elsewhere.
"We have huge needs," said Duluth School Board member Rosie Loeffler-Kemp, "and we want to make sure we're providing the best educational services to our children and families."
A concession was made following a 2013 legislative auditor report. The report recommended changing the laws for what resident districts pay to charter schools, other districts and private schools for their special education students. Lawmakers then approved the 10 percent portion that charter schools now pay.
That minor change hasn't been enough for many school districts, especially those in the Twin Cities, which has the state's highest concentrations of charter schools, said Scott Croonquist, executive director of the Association of Metropolitan School Districts in St. Paul.
"Our position is that the state should really cover those costs," he said.
Eugene Piccolo doesn't argue with that. The executive director of the Minnesota Association of Charter Schools said the state and federal government's responsibility to fulfill their obligations is "the fundamental issue."
He also cited a federal special education rule that says public schools typically have to spend the same amount they did the year prior, "which doesn't drive any innovation or economy or efficiency."
Piccolo acknowledges that some charter schools may not consider expenses when they determine services, but noted that a combination of parental pressure, civil rights complaints and lawsuit threats might make all public schools, charter and not, acquiesce to parental demand for certain services for their kids.
Changing the law to increase the portion of money that charters, for example, contribute toward unreimbursed special education costs would harm funding for all of the kids served by those schools, Piccolo said. Charter schools don't receive local tax revenue like traditional school districts, he said, and get less money per student from the state.
The special education funding formula change that took effect in 2016 has had a "significant" impact on the Greenway school district, said Superintendent David Pace. The amount it pays out of its general fund to cover what remains in special education costs once state, federal and third-party billing money comes in is about 10 percent of its budget.
"We have one of the highest cross subsidy disparities in the state," Pace said, noting the district works hard to be cost-effective, but "we've got a lot of students with pretty significant needs."
The formula change came about because of the increase in what districts were spending from their general funds to pay special education costs not covered by state and federal aid. A $40 million increase to special education aid in Minnesota was ultimately approved by lawmakers, but it came with a growth cap for some school districts; Duluth and Greenway are two of them.
The cap limits the state funding increase those districts can receive over what the old formula would have given, said Tom Melcher, finance director for the Minnesota Department of Education. Duluth still had an increase in special education funding under the formula change, he said, but it wasn't enough to cover its costs.
Duluth's spending is above its state funding cap, because the cap was set in a year when revenue and spending were atypical, Gronseth said. He wants the law changed to take into account a range of years.
The idea behind the formula change was to distribute the funding increase equally across the state, Melcher said.
"It's always a question: do you target the highest needs or make sure everyone gets inflationary growth? This was a compromise," he said. "I am sure Duluth got a bigger increase than a lot of districts did, but was it enough? Probably not. ... But the Legislature did what they could with the budget they had to work with."
Area lawmakers have heard Duluth's concerns, they said, and many of them mirror what other legislators are hearing throughout the state. Both state Sen. Erik Simonson and state Rep. Liz Olson of Duluth say a task force would be a good way to tackle the complicated issues related to special education funding.
The ideal situation, Olson said, is to provide the best services possible to students regardless of where they enroll. But when one entity is able to "provide (more) at the expense of the other, I think that's a problem," she said. "I would rather see an equitable way of dealing with this, where everybody is doing better."