New Hampshire’s new special education aid formula, explained

New Hampshire schools could eventually receive millions of dollars more in state aid for costly special education services, under a new state law. 

But for districts, the assistance comes with a catch: a mountain of new paperwork.

House Bill 1563, which Gov. Kelly Ayotte signed this month, broadens eligibility for New Hampshire’s special education aid program, allowing schools to seek partial state reimbursement for a new tier of special education costs.

The law does not take effect until July 2028. Supporters say it will help curb a budgetary problem growing in New Hampshire and beyond: rising special education costs that are hitting local taxpayers. 

But the law also includes new accountability metrics for schools designed to make sure the special education funding is being spent appropriately, and some worry the additional compliance could be costly.  

“I hope that House Bill 1563 has not created more barriers than it is trying to remove, just for districts to be able to get some relief to their local property taxpayers,” said Becky Wilson, director of governmental relations at the New Hampshire School Board Association. 

Here is the new special education funding law, explained. 

How does special education aid work?

The new law updates a complicated state program.

New Hampshire public school districts are required by the federal Individuals with Disabilities Education Act to provide specialized instruction and services to students with disabilities — no matter the cost. That can include the cost of providing a paraprofessional, therapist, speech language pathologist, or other professional, as well as assistive technology, health accommodations, and transportation costs. 

And while the state’s school funding formula provides schools a $2,229 stipend for each student receiving special education services, the actual per-student cost for those services can often greatly exceed that. 

That’s where the special education aid program comes in. Under the current system, if a district can show that one of its special education student’s needs cost it 3.5 times more than the average cost to educate any student in the state, it can receive reimbursement for those costs. For example, in the 2023-24 school year, the average cost per public school student was $21,545, so to qualify for special education aid, a district would have to have paid at least $75,408 — 3.5 times that — in services for one student to get state aid.

Currently, for each special education student whose cost falls between 3.5 times to 10 times the average student cost — $75,408 to $215,450 in 2023-24 — the school pays for the first $75,408 and the state is supposed to pay 80% of anything above. For every dollar spent above 10 times the average cost, the state is supposed to reimburse districts 100%.

That tiered system puts districts on the hook for many of the lower costs but allows some relief for the most expensive cases.

This year’s law creates a new tier: Students whose special education costs fall between 2.5 times and 3.5 times the average student cost. Starting in 2028, the state will begin reimbursing 15% of the costs in that tier. 

On the other end of the spectrum, the new law eliminates the unlimited, 100% state reimbursement for a student’s costs above that 10 times the average student cost level. Instead, the state will soon only be required to provide 90% of those higher costs. 

The result: School districts will be able to get reimbursement for a wider number of students that fall in that lower cost tier. But districts with students with complex and expensive needs may need to pay more.

How will the changes affect budgets?

It is difficult to assess precisely how the new formula will affect districts, or how much it will cost the state. In a fiscal analysis of the bill in March, the Department of Education said it could not predict special education expenses in 2028 and 2029.

But the analysis suggested the new formula could be better for some districts and worse for others. 

Had the new law been in effect in the 2024-25 school year, the department stated, an additional 798 students would qualify for the lower, 2.5 to 3.5 multiplier tier, and districts could have received $3,228 more in reimbursements per student in that tier. 

But the reduction of reimbursement from 100% to 90% in the new system would have affected 64 students across 44 districts, costing them between $459 and $49,000 per student, the state’s analysis found. 

However, the net effect of the new law appears positive for schools. The new formula would have seen the state distribute $2.58 million more that year in aid for students in the lowest tier, and $708,528 less for students in the highest year, the department estimated.

What are the hurdles?

For school districts, the additional reimbursement is just one component of the law. The law also requires stricter reporting from schools.

Districts will soon be required to provide documentation that the claimed services are actually necessary for each student’s individualized education program. For that, the law suggests, they might include invoices, daily schedules, and payroll records.

School administrators will also be required to prove that they have exhausted all other sources of funding for the services before they seek the state funding. That includes any private insurance and the federal Medicaid to Schools program, which provides reimbursement for some services delivered to low-income students enrolled in Medicaid. 

And finally, the law requires districts to submit to a state review every five years, and requires the Department of Education to cycle between different districts each year. Schools will also be subject to random audits by the department as well as targeted audits in the case of data anomalies. 

Those provisions are designed to be safeguards against waste, the law’s proponents say. But Wilson said the new requirements could create headaches. 

The lower threshold means that more students will be eligible for reimbursement in each district, but it also means those schools must collect much more information for each student, Wilson said. 

And forcing districts to exhaust all alternative funding sources could be a logistical quagmire, she added, especially as schools attempt to implement Medicaid to Schools. That program is run through the Department of Health and Human Services, not the Department of Education, and enrollment requires parental consent for each student. Meanwhile, Medicaid to Schools grants are delivered to schools as one lump sum, not separated per student, creating another accounting challenge, Wilson said.

At the same time, school districts cannot choose not to provide the legally obligated special education services; doing so could open them up to a court order of compensatory education, in which the district is responsible for private options taken by a parent. That, Wilson noted, can be much more expensive. 

Because schools must front the costs during the school year and seek reimbursement later, the paperwork requirements can come on top of tricky budgeting decisions and the sheer difficulty of finding the right professionals at all, she said. 

“Districts are already struggling with how to ensure that students have access to all of those services,” she said. “We are resource-poor in this, especially in certain parts of the state.”

To supporters, though, the new formula achieves a stronger balance, paperwork hoops and all: The state relieves local taxpayers of more expenses, and districts are held to accountable spending decisions. 

“These measures, taken together, may lay a foundation for further increasing support to districts gradually over time,” said Rep. Walter Spilsbury, a Charlestown Republican, in a written report to the House in March.