New Hampshire School Districts Face Major Special Education Funding Shortfall

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New Hampshire school districts will be hit with a spike in costs for special education this year due to higher than usual costs per student, according to the state Department of Education.

And the state’s special education aid fund – which is supposed to assist school districts with unexpected costs – does not have enough money to make up the difference.

Lawmakers dedicated $33.9 million to the fund for the 2025 fiscal year in the two-year budget passed in 2023. But school districts’ reimbursement requests for this year totaled $50.3 million – leaving a $16.4 million gap.

The shortfall means the state can cover only about 67.5 percent of the funding it is supposed to give to districts. It’s a major drop: In 2023, that number was 87 percent; in 2022, it was 98.3 percent.

Now, barring emergency legislative appropriation, school districts will need to make up that shortfall themselves, an expense that could fall to local taxpayers.

“We understand how this reduction in funding could impact your schools, your budgets, and, ultimately, the communities and students you serve,” wrote Department of Education Commissioner Frank Edelblut in a letter to school leaders Tuesday. “The gap between Special Education Aid claims and the amount in the state budget to reimburse districts creates real challenges, and we acknowledge the strain this places on your districts.”

The news could have a large impact on school budget season. School boards typically meet in the late fall and winter to craft budgets they present to voters ahead of town meeting season in March.

In an email, Mark MacLean, executive director of the New Hampshire School Administrators Association, said the costs could cut into savings or other funding priorities in school districts.

“While anticipated revenues are likely going to fall within estimates, it’s clear that expenses have increased,” he said. “Districts will be compelled to access trust funds and or potentially divert other funds within their budgets to cover these expenses.”

By one measure, the shortfall could have been avoided: Earlier this year, the House passed House Bill 1656, which would have changed the formula for awarding special education aid and resulted in the state paying $17.7 million more to school districts. That bill was sent to interim study by the Senate in May.

In an interview Friday, Edelblut said the department does not have immediate plans to ask lawmakers for emergency funding for the short term but would push lawmakers to reconsider the funding formula next year.

A multi-tiered assistance system

In New Hampshire, state assistance for special education expenses comes in a few ways.

First, all school districts that don’t raise enough money through the statewide education property tax to hit a target set by the state receive adequacy aid – which includes $6,324 per student receiving special education services.

After that, school districts must bear any additional costs for those special education students up to 3½ times the current average cost per pupil. Because the 2024 average is $20,323, that means school districts must currently pay up to $72,131 per student in special education costs on their own.

Any per-student expenses above that 3½ times threshold is expected to be reimbursed by the state at 80 percent. Expenses above 10 times the average cost per pupil – $203,230 – must be 100 percent covered by the state.

The system is designed to require the state to step in when special education services are particularly expensive for a school district’s students. And this year, $121.5 million was submitted by districts to the state for reimbursement, $50.3 million of which cleared the cap.

But the state special education aid only works if lawmakers fund it. This school year, the amount appropriated fell short.

In the interview, Edelblut said he was surprised.

“Nobody called me last year and said, ‘Oh, by the way, we’re gonna increase these costs,’” he said. “It was a surprise to me, like, I didn’t see it until we started getting all these invoices in.”

Legislative underfunding

Lawmakers have broadly increased the amount the state sets aside for special education aid in the last seven years. But in recent years, they have not kept up with inflation.

In 2017 and 2018, the Republican-led Legislature set aside $22.3 million when districts were owed $32.5 million – a per-pupil funding rate of 68.6 percent. But beginning in 2019, the Democratic-led Legislature raised that set-aside to $32.6 million, allowing the state to pay districts at a rate of 94.5 percent.

From 2021 to 2024, however, the Legislature has barely increased the appropriation. It rose from $33.3 million in 2021 to $33.9 million in 2024.

That amount was appropriate initially – the reimbursement rate even exceeded 100 percent some years. In 2024, however, costs increased after 105 more students qualified for high amounts of aid than the year before and the amount eligible for reimbursement increased by $11.3 million.

One cause of the increased costs: The Legislature raised the maximum eligibility age for special education services from 21 to 22 last biennium, meaning some students are receiving services longer. That extension accounted for 48 additional students who qualified for the additional aid.

But the statutory change does not account for the additional increases in students – nor for the uptick in costs per student.

Edelblut said inflation has driven up special education costs, but that he did not know the exact reasons. And he said he did not know what was driving the increase in students.

“My understanding is that there’s a lot of – the anxiety, the depression, those kinds of disruptive events that drive a kid to need interventions, but not more than $70,000 worth of interventions,” he said.

The amount of state special education aid available – $33.9 million – is a fraction of the overall cost of special education services in New Hampshire public schools this year, which totals $915 million. Most of that cost falls below the $72,000 trigger threshold for state assistance and is paid by school district and state adequacy payments.

But the cost reflects an overall rise in special education costs. In 2017, the overall spending number was $709 million.

Even though lawmakers underestimated the spike in special education costs this year, they could still dedicate emergency funding to fill the hole. If the Department of Education were to request additional money from the general fund from the Joint Legislative Fiscal Committee, the shortfall could be covered in time for school districts’ final budgets.

But Edelblut said the department does not plan to request more spending, calling the move premature.

“I don’t think we’ve gotten to that point yet,” he said, noting that the department is still analyzing the spending and has not finalized figures. “I’ve had conversations with members of the Legislature saying, ‘Hey, this is an important issue that’s going to be real for us coming up into the next legislative session.’”

Instead, he suggested the state should evaluate whether the nearly $1 billion spent by school districts and state funds is efficient.

“We’re spending $900 million,” he said. “Are we optimizing how we’re doing that to make it as efficacious as possible?… I don’t want to spend a billion dollars and not meet the needs.”

New Hampshire Bulletin is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. New Hampshire Bulletin maintains editorial independence. Contact Editor Dana Wormald for questions: info@newhampshirebulletin.com. Follow New Hampshire Bulletin on Facebook and X.

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