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John Bowden and Keenan Konopaski January 4, 2006

Special Education Excess Cost Accounting Methodology and Reporting Requirements Preliminary Report to the Joint Legislative Audit and Review Committee. John Bowden and Keenan Konopaski January 4, 2006. Excess Cost Study Overview. Over v i ew. Study Objectives Special Education Background

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John Bowden and Keenan Konopaski January 4, 2006

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  1. Special Education Excess Cost Accounting Methodologyand Reporting RequirementsPreliminary Report to the Joint Legislative Audit and Review Committee John Bowden and Keenan Konopaski January 4, 2006

  2. Excess Cost Study Overview Over v i ew • Study Objectives • Special Education Background • How Methodology Operates • JLARC Analysis • Findings • Examples of Alternate Approaches • Recommendations Special Education Excess Cost Study

  3. Excess Cost Study Objectives* Ob j ec t i ves • Analyze special education excess cost accounting methodology. • Incorporate State Auditor's Office review of appropriate and consistent application. • Examine opportunities for modifying. • Assess impact of modifications. *2005-2007 Operating Budget, Sec. 103 and Sec. 123 Special Education Excess Cost Study Preliminary Report Page 4

  4. What is Special Education? Background Special education means…* • specially designed instruction, and related services, provided to an eligible student • designed to meet the unique needs of the student • in conformance with the student’s IEP • at no cost to the parents • provided in the least restrictive environment possible *WAC 392-172-035 through 392-172-080 Special Education Excess Cost Study Preliminary Report Page 1

  5. Brief History of Special Education in Washington State Background • 1971 – Education for All Act (HB 90); guaranteed access for all children. • 1981 – Funding on “full-cost” basis (14 categories of disability conditions). • 1995 – Funding on “excess cost” funding; no standardized accounting method required. • 2001 – All districts required to use current standardized excess cost accounting methodology for special education expenditures. Special Education Excess Cost Study Preliminary Report Page 2

  6. What Are Special Education Excess Costs? Background “Excess costs” are those expenditures for special education and related services for special education students that exceed the amount needed to provide a basic education to those students.* *The Accounting Manual for Public School Districts in the State of Washington Special Education Excess Cost Study Preliminary Report Page 5

  7. Legislative Intent – Excess Costs Background Through budget proviso language,* the Legislature has directed that: • OSPI shall use the excess cost methodology developed and implemented for the 2001-02 school year… to ensure that special education students: • are basic education students first • as a class, are entitled to the full basic education allocation • are basic education students for the entire school day • The excess cost methodology shall be required of all school districts. *Similar language has appeared in each Operating Budget since 2001. Special Education Excess Cost Study Preliminary Report Page 5

  8. Excess Costs Average Costs for Providing Basic Education Different Excess Costs for Different Special Education Students Background Special Education Student A Special Education Student B Special Education Excess Cost Study Preliminary Report Page 6

  9. Contracted Services, Non-Employee Related Costs, etc. 8% Benefits 19% Certificated Salaries 51% Classified Salaries 22% Special Education Expenditures* Background * 2003-04 data from OSPI’s on-line “5 Year Special Education (Program 21)” report. Special Education Excess Cost Study Preliminary Report Page 1

  10. Excess Costs Special Education Costs Assigned to Basic Education How Are Special Education Teaching Costs Assigned? Methodology Background • Obtain prior year’s child count by service setting • Calculate approximate special education student FTE • Estimate regular education cost using 20:1 student/teacher ratio • Subtract to get excess cost Costs for Time in Special Education Classrooms Special Education Classroom Costs Total Education Costs Costs for Time in Regular Education Classrooms Special Education Excess Cost Study Preliminary Report Page 7

  11. Excess Cost 12 11 1 2 10 $33,900 3 9 8 4 5 7 6 Assigned to Basic Education $26,100 Special Education Students Spend 100% of School Day in Special Education Classroom Methodology District A $60,000 Special Education Teacher Salary and Benefits Regular Education Classrooms Special Education Excess Cost Study Preliminary Report Pages 9-11

  12. Excess Cost 12 11 1 2 10 3 9 8 4 $49,200 5 7 6 Assigned to Basic Education $10,800 Special Education Students Spend 50% of School Day in Special Education Classroom Methodology District B AM PM $60,000 Special Education Teacher Salary and Benefits Regular Education Classrooms Special Education Excess Cost Study Preliminary Report Pages 9-11

  13. Possible That Excess Costs May Not Correspond with Class Sizes JLARC Analysis Special Education Excess Cost Study Preliminary Report Page 11

  14. Reported Excess Costs Above Funding $12,470 $2,830 Unused Special Education Funds $60,000 Special Education Teacher Salary and Benefits $36,730 $36,730 $33,900 $60,000 Special Education Teacher Salary and Benefits $60,000 Excess Costs Assigned to Special Education $10,800 $60,000 $49,200 $26,100 $40,880 Assumed Basic Education Funding Used in Regular Classroom $30,080 Special Education Costs Assigned to Basic Education $14,780 Identical Special Education Teacher Expenditures, Different Assigned and Reported Costs JLARC Analysis Special Education Funding Basic Education Funding School District A (100% Pullout) School District B (50% Pullout) Funding Allocated to Each School District for 10 Special Education Students Special Education Excess Cost Study Preliminary Report Page 10

  15. Excess Costs $60,000 Special Education Teacher Salary and Benefits $60,000 Special Education Teacher Salary and Benefits Basic Education Costs $33,900 Assumed Basic Education Funding Used in Regular Classroom $49,200 $60,000 $60,000 $40,880 $40,880 $30,080 Special Education Costs Assigned to Basic Education $26,100 $14,780 $10,800 Only Excess Costs Are Reported JLARC Analysis School District A (100% Pullout) School District B (50% Pullout) Special Education Excess Cost Study Preliminary Report Page 10

  16. Findings – Understandability Findings Finding 1: Excess cost accounting is complicated. Many school districts do not fully understand the underlying accounting principles. Finding 2: Different from many traditional, more widely understood cost accounting practices; we found no other state employing a similar methodology. Special Education Excess Cost Study Preliminary Report Page 18

  17. Findings – Ease to Implement and Administer Findings Finding 3: While the OSPI accounting methodology for teaching staff may be hard to understand, the steps have been simplified making it easy to administer. However, no simplified steps are provided to districtsforassigning costsof contracted services and non-employee related costs. Special Education Excess Cost Study Preliminary Report Page 19

  18. Findings – Ability to Capture Expenditures and Assign Costs Findings Finding 4: Some assumptions made to simplify process can lead to inaccuracies in costs reported. Special Education Excess Cost Study Preliminary Report Page 19

  19. Findings – Ability to Capture Expenditures and Assign Costs Findings Finding 5: State Auditor’s Office found many districts not accurately and consistently assigning costs. For example: • Numerous data errors regarding special education student service time and location. • Inconsistencies in how they interpret what types of expenditure must be split between special education and basic education programs. • Lack of awareness for how contracted service expenditures should be assigned. Special Education Excess Cost Study Preliminary Report Page 19

  20. Findings – Ability to Capture Expenditures and Assign Costs Findings Finding 6: The excess cost methodology does not report information about the total costs ofserving special education students. Therefore, cannot reliably comparetotalcosts across districts and to program funding. Special Education Excess Cost Study Preliminary Report Page 19

  21. Findings – Influence on Program Management and Budgeting Findings Finding 7: The excess cost methodology can yield results that may appear counter intuitive to district staff and public: e.g., the more time special education students spend in a regular classroom, the greater the percentage of special education teachers’ costs are charged as an excess cost. Special Education Excess Cost Study Preliminary Report Page 20

  22. Findings – Influence on Program Management and Budgeting Findings Finding 8: District officials indicate that excess cost accounting methodology does not influence their budget or program management decisions. Excess cost methodology is viewed as an after-the-fact administrative exercise. As a result, it does not provide evidence to ensure whether or not students receive an appropriate share of the basic education allocation. Special Education Excess Cost Study Preliminary Report Page 20

  23. Alternate Cost Accounting Examples Alternatives “Standards-Based” – Specially designed instruction, related services, etc. are “costed out” with standard unit costs. This becomes a service plan and itemized record of every special education student’s expenses. “Full-Cost” – Accounts for all expenditures for serving special education students regardless of service setting. Note: See Figure 6 on page 24 of the report and pages 21-24 for comparative discussion of the alternate approaches. Special Education Excess Cost Study Preliminary Report Pages 22-24

  24. Recommendations Recommenda t i ons • Legislature should decide whether the current accounting approach or an alternative best meets needs of state, school districts, and special education students. Selecting an approach involves trade-offs between multiple criteria. The Legislature has not indicated the priority they place in each of these criteria. Therefore, choosing to change methods necessarily involves a policy decision. Special Education Excess Cost Study Preliminary Report Page 29

  25. Recommendations Recommenda t i ons • If current methodology is maintained, OSPI, assisted by stakeholders, should examine modifications to improve the accuracy of assigning and reporting excess costs. Special Education Excess Cost Study Preliminary Report Page 29

  26. Recommendations Recommenda t i ons • If current methodology is maintained, OSPI should provide clear guidance and instruction on how to accurately and appropriately: • Complete service setting child counts. • Assign costs of contracted services and non-employee related costs. Special Education Excess Cost Study Preliminary Report Page 30

  27. Recommendations Recommenda t i ons • If current methodology is maintained, OSPI should require school districts to report all costs of serving special education students (i.e., special education expenditures assigned to basic education should be reported separate from other basic education costs). Special Education Excess Cost Study Preliminary Report Page 30

  28. JLARC Staff to Contact for Further Information I n f o rma t i o n / Co n t a c t s John Bowden (360) 786-5298 bowden.john@leg.wa.gov Keenan Konopaski (360) 786-5187 konopaski.keenan@leg.wa.gov Special Education Excess Cost Study

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