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Special education funding is the mix of federal grants, state aid and local revenue that pays for the special education, related services and supports written into students’ IEPs. The federal part comes mainly from Part B of the Individuals with Disabilities Education Act (IDEA). This guide covers how Part B money flows, the FY2026 level and the FY2027 request, the 40% authorization versus the actual share, state formulas, maintenance of effort, early intervening services, high-cost funds, school-based Medicaid and the federal changes of 2026. Fiscal rules carry compliance consequences: confirm decisions with your state agency and district counsel.
Table of contents
Executive Summary
For fiscal year (FY) 2026, Congress provided $14.23 billion for IDEA Part B Grants to States in the Consolidated Appropriations Act, 2026 (P.L. 119-75), $20 million more than in FY2025. The U.S. Department of Education (ED) puts that at an average of $1,743 per child, about 10% of the national average per-pupil expenditure (APPE). Congress authorized up to 40%. In 2024-25, 8.2 million students ages 3 to 21 were served under IDEA Part B.
State formulas and local budgets carry the rest. FY2027 began on October 1, 2026 under a continuing resolution that runs through December 11, 2026, and in June 2026 ED signed agreements that give the Department of Health and Human Services (HHS) the management of future IDEA grants. The 2026-27 school year is funded; 2027-28 is the open question.
Key Takeaways
- Three layers pay: federal IDEA grants and Medicaid, state formulas and local budgets.
- The federal share is about 10% of APPE, roughly a quarter of the 40% Congress authorized in 1975.
- Beyond a fixed base, Part B subgrants follow enrollment and poverty, not a district’s own count of students with IEPs.
- Maintenance of effort locks in local spending: a district may spend less only for the reasons the regulations list.
- Up to 15% of Part B can fund early intervening services; a district found significantly disproportionate must reserve the full 15%.
- 2026 changed who administers IDEA, not what the statute requires of districts.
How Special Education Funding Works
Special education funding is the combination of federal grants, state aid and local revenue used to provide a free appropriate public education (FAPE) to every eligible student with a disability, whatever the cost of an individual program.
| Layer | Main sources | How it reaches districts |
|---|---|---|
| Federal | IDEA Part B Grants to States (section 611, ages 3-21) and Preschool Grants (section 619, ages 3-5); Medicaid for covered health services | Formula grants through the state education agency; Medicaid claims through the state Medicaid agency |
| State | Weights or grants in the school funding formula, reimbursement programs, high-cost funds | State formula, which differs by state |
| Local | Local taxes and general funds | District budget |
FAPE must be available to all eligible children ages 3 through 21 (34 CFR 300.101), so local budgets absorb what federal and state aid do not cover. Part B money may pay only excess costs and must supplement, not supplant, other funds (34 CFR 300.202); permitted uses are listed in 34 CFR 300.208. The IEP team, not the budget, decides which services a student receives; see related services in special education.
How Part B Money Flows to Districts
- ED to states: each state receives its FY1999 amount, then 85% of any remainder by child population and 15% by children in poverty (34 CFR 300.703).
- State set-asides: administration and other state-level activities, including monitoring, mediation and an optional high-cost fund (34 CFR 300.704).
- State to districts: each LEA, charter LEAs included, receives a base payment tied to FY1999, then 85% of the remainder by public and private school enrollment and 15% by children in poverty (34 CFR 300.705). Preschool Grants use a FY1997 base (34 CFR 300.816).
After the base, a district’s allocation rises with enrollment and poverty, not with its number of students with IEPs. The Congressional Research Service (CRS) dates this design to the 1997 amendments, which replaced child-count funding with population and poverty factors.
Forward Funding: Which Appropriation Pays for Which School Year
IDEA Part B is forward funded: each appropriation becomes available on July 1 and October 1 for the following school year. The House FY2027 bill makes $5.96 billion available on July 1, 2027 and $9.28 billion on October 1, 2027 “for academic year 2027-2028” (H.R. 9260). FY2026 money pays for 2026-27; FY2027 decisions shape 2027-28.
Federal Special Education Funding in FY2026 and FY2027
| Year and stage | Part B Grants to States | Special education account (all IDEA programs) | Status |
|---|---|---|---|
| FY2025 enacted | $14.21 billion | $15.47 billion | Funds the 2025-26 school year |
| FY2026 enacted | $14.23 billion | $15.49 billion | P.L. 119-75, signed February 3, 2026; funds 2026-27 |
| FY2027 President’s request | $15.40 billion | $16.03 billion | Folds Preschool Grants and five national activities programs into Grants to States |
| FY2027 House committee bill | $14.27 billion | $15.54 billion | H.R. 9260, reported June 11, 2026; no floor vote |
| FY2027 in effect | FY2026 rate | FY2026 rate | Continuing resolution (P.L. 119-103) through December 11, 2026 |
Sources: ED’s FY2027 special education budget justification; CRS, September 8, 2026, which notes that the Senate committee had not marked up its bill; the House bill text; the House Grants to States figure from the committee report, H.Rept. 119-696.
The request would fold the $420 million Preschool Grants program and $257.6 million in national activities, including personnel preparation and parent information centers, into Grants to States. Part C (infants and toddlers) would stay separate at $590 million.
The 40 Percent Promise and the Actual Federal Share
Since 1975, the maximum Part B grant has been set at 40% of APPE multiplied by the number of children with disabilities served, adjusted since 2007 for population and poverty changes. CRS reports that appropriations have never reached that “full funding” level: in FY2025, Part B covered about 10.2% of APPE, “just over 25% of the full funding level” (CRS R44624, February 2026). ED’s own tables show 10% for FY2026, and about 10% for the FY2027 request, which ED says would average $1,846 per child.
How States Fund Special Education
The Education Commission of the States (ECS) classifies state formulas in its special education funding comparison (March 2026, updated June 2026), covering the 50 states and the District of Columbia.
| Mechanism | How it works | States and DC | Examples |
|---|---|---|---|
| Multiple weights or per-student grants | Several weights or dollar amounts on top of the base, by student need or type of service | 23 | Florida, Texas, Ohio |
| Single weight or per-student grant | One add-on for every eligible student | 13 | California, New York, Maryland |
| Resource allocation | The state prices staff and resources and funds a share of that cost | 6 | Virginia, Illinois, Idaho |
| Cost reimbursement | Districts submit eligible expenses and the state reimburses all or part | 6 | Michigan, Wisconsin, Kansas |
| Hybrid | A combination of the above | 3 | Colorado, Hawaii, Minnesota |
Eight states use census-based funding, which counts total students rather than students with IEPs. California is one; its dollars flow through the regional consortia described in our guide to the SELPA. Thirty-six states also fund high-cost services. Florida’s weighted model is covered in exceptional student education.
The Local Share
California shows how the local share can grow. Legislative Analyst’s Office (LAO) estimates presented to a state Senate budget subcommittee in April 2026 put the share of special education costs covered by local funds at roughly 60%, up from roughly 50% a decade earlier (Senate Subcommittee No. 1, April 23, 2026). The 2026-27 state budget then raised California’s per-student special education base rate.
Maintenance of Effort: The Rule That Holds Local Spending
Maintenance of effort (MOE) has two tests (34 CFR 300.203):
- Eligibility: budget at least what was spent in the most recent year with available data.
- Compliance: spend no less than in the preceding year.
- Four ways to pass: local funds, or state and local funds, in total or per capita.
- No reset after a miss: next year’s required level ignores the failure.
- Repayment: the state returns the shortfall, or the district’s subgrant if lower, from non-federal funds.
States face a parallel rule: a state that cuts its financial support for special education below the prior year loses the same amount of Part B, unless ED grants a waiver (34 CFR 300.163).
Exceptions and the 50 Percent Adjustment
| Allowed reduction | Rule |
|---|---|
| Voluntary departure or departure for just cause of special education or related services staff | 34 CFR 300.204(a) |
| A decrease in enrollment of children with disabilities | 300.204(b) |
| An exceptionally costly program ends because the student moved, aged out or no longer needs it | 300.204(c) |
| Long-term purchases such as equipment or construction end | 300.204(d) |
| The state high-cost fund assumes the cost | 300.204(e) |
| Up to 50% of an increase in the Part B allocation, with an equal amount of local funds spent on activities allowed under the Elementary and Secondary Education Act (ESEA) | 34 CFR 300.205 |
The state must deny the adjustment to a district it finds unable to provide FAPE or has taken enforcement action against, and early intervening services spending counts toward the same cap. These calculations have audit consequences: run them with your state agency’s guidance and district counsel.
CEIS and Comprehensive CEIS
| Coordinated early intervening services (CEIS) | Comprehensive CEIS | |
|---|---|---|
| When | Voluntary | Required when the state identifies significant disproportionality |
| Amount | Up to 15% of Part B, less any MOE adjustment | The maximum 15% |
| Who | K-12 students not identified for special education, with emphasis on K-3 | Age 3 through grade 12, including students with disabilities, particularly groups that were overidentified |
| Uses | Professional development; academic and behavioral evaluations, services and supports | The same, plus addressing the factors behind the disproportionality |
| Rule | 34 CFR 300.226 | 34 CFR 300.646(d) |
CEIS cannot delay the evaluation of a student suspected of having a disability; see special education evaluation. How states identify significant disproportionality is covered in our guide to the SPP/APR.
High-Cost Funds and Risk Pools
CRS notes that the cost of educating children with high-cost needs can range from 3 to more than 13 times APPE. IDEA lets each state reserve 10% of its other state-level activities set-aside for a high-cost fund (34 CFR 300.704(c)):
- Definition: the state and districts define a high-need child, whose cost must exceed 3 times the state’s APPE.
- Eligible costs: direct special education and related services in the IEP, including necessary residential room and board.
- Exclusions: no legal fees or court costs, and no cap on spending per child.
- Public plan: posted at least 30 days before the school year.
Districts may also form their own risk pools or consortia with Part B funds (34 CFR 300.208(a)(3)).
School-Based Medicaid and Other Public Benefits
A district may bill Medicaid for covered services in a student’s IEP, with protections for families (34 CFR 300.154(d)):
- No enrollment requirement and no out-of-pocket cost such as a deductible or copay.
- No harm to coverage: no decrease in lifetime coverage, premium increase or risk to a home and community-based waiver.
- Consent once, notice every year: written parental consent before the first access, and written notification before it and annually after.
The Centers for Medicare & Medicaid Services (CMS) consolidated its rules on payment for school-based services and administrative claiming in a May 2023 comprehensive guide, still listed in the HHS guidance repository in October 2026. Billing rules are set by each state’s Medicaid program.
Federal Changes in 2026
The ED-HHS Interagency Agreements
On June 16, 2026, ED announced interagency agreements under which “HHS will partner with ED on special education and rehabilitative services” (ED press release). According to ED’s fact sheet as reported by K-12 Dive (June 18, 2026), HHS takes on the grant components of IDEA Parts B, C and D, monitoring and the annual state determinations, guided by the Office of Special Education and Rehabilitative Services (OSERS); ED keeps statutory responsibility and manages the FY2026 IDEA grants.
- September 2026: NPR reported that much of the OSERS staff was due to move to the HHS building and that its acting head resigned effective September 11.
- Congress: on July 30, 2026, the Senate HELP Committee approved, 13-9, S. 5046, which would bar moving the office overseeing special education to another agency; it awaited a Senate vote in September.
Federal Staffing
ED’s Inspector General found that actions taken between January 20 and March 31, 2025 cut ED’s workforce by at least 1,579 of 3,902 employees (40%), and OSERS’s by at least 14% of 177 (OIG, June 2026). In October 2025, ED sent layoff notices to 466 employees, which special education associations said fell heavily on the Office of Special Education Programs (OSEP) (K-12 Dive); the November 12, 2025 continuing resolution voided layoffs taken during the shutdown (CRS R48765).
Common Mistakes District Leaders Make
- Treating Part B as the budget. At about 10% of APPE, it is a supplement to state and local money.
- Raising local effort with one-time money. The higher level becomes the MOE floor.
- Taking the 50% adjustment without an ESEA plan. The freed local funds must go to ESEA-allowable activities.
- Forgetting that CEIS counts against the adjustment cap.
- Billing Medicaid without current consent and annual notice.
- Letting cost drive IEP decisions. Services follow the student’s needs; funding follows the IEP.
- Reading federal reorganization as a change in district duties. The statute and regulations still apply.
Recommended Actions
- Map every special education dollar by source: Part B, Preschool, state aid, Medicaid, local.
- Run the MOE test on the budget before the board adopts it, under all four methods.
- Model 2027-28 at three federal levels: FY2026 rate, House bill, President’s request.
- Decide on voluntary CEIS each spring, after checking your disproportionality status.
- Audit Medicaid consent files and claim denials once a year.
- Assign one person to track federal changes, including who issues grant awards and guidance.
Questions District Leaders Should Ask
- What share of our special education spending comes from local funds, and how has it changed in five years?
- Which MOE method did we pass last year, and by how much?
- Did we take the 50% adjustment, and where did the local funds go?
- How much Medicaid revenue did IEP services generate, and how much was denied?
Frequently Asked Questions
Who funds special education programs in public schools?
Three levels share the cost. The federal government contributes IDEA Part B grants, about 10% of the national average per-pupil expenditure, plus Medicaid for covered health services. States add money through their funding formulas, using weights, reimbursement or resource-based models. Districts pay the remainder from local revenue, because they must provide a free appropriate public education to every eligible student.
What is the biggest issue in special education?
There is no official ranking, but staffing and funding come up repeatedly in federal and state data. In 2024-25, 45 states reported special education teacher shortages, according to the Learning Policy Institute. On funding, CRS reports that federal Part B appropriations have never reached the 40% of APPE authorized in 1975, leaving states and districts to cover a growing share of costs.
How much special education funding is federal?
For FY2026, Congress appropriated $14.23 billion for IDEA Part B Grants to States, which ED estimates at $1,743 per child, about 10% of the national average per-pupil expenditure. The whole special education account, including preschool grants, infants and toddlers and national activities, was $15.49 billion. The federal share of a given district’s spending depends on its state formula and local revenue.
What can special education funds be used for?
IDEA Part B funds pay the excess costs of special education and related services for students with disabilities, and must supplement other funds. Districts may also use them for services in regular classes that incidentally benefit other students, early intervening services up to 15%, high-cost risk pools, and technology for IEP case management (34 CFR 300.202 and 300.208). State funds follow each state’s own rules.
Is special education funding being cut?
Federal appropriations had not been reduced as of October 2026. FY2026 Grants to States rose $20 million to $14.23 billion, and FY2027 began under a continuing resolution at the FY2026 rate through December 11, 2026. The FY2027 request would raise Grants to States to $15.4 billion by folding preschool grants and national activities into it; the House committee bill would add $46 million to the account.
Can AI help a district analyze its special education budget?
An AI assistant can help a business office draft a plain-language budget summary for the board, restate a regulation in simpler terms or build a blank scenario template. It cannot certify an MOE calculation, so staff verify every number against state tools. Keep student records and identifiable information out of tools the district has not approved. See the ChatGPT for teachers guide.
Related Resources
- SPP/APR: State Performance Plans and IDEA Determinations
- SELPA: California’s Special Education Local Plan Areas
- Related Services in Special Education
- Special Education Evaluation
- Exceptional Student Education in Florida
- IEP Meeting Guide
Conclusion
Special education funding rests on a small federal grant with large conditions. IDEA Part B pays about a tenth of the average cost per pupil and binds districts to maintenance of effort, excess cost and supplement-not-supplant rules; states and local budgets carry the rest. Districts that know their MOE floor, claim what Medicaid and high-cost funds allow, and model 2027-28 at several federal levels will face fewer forced choices.
Sources: Congressional Research Service, The Individuals with Disabilities Education Act (IDEA) Funding: A Primer, R44624 (February 13, 2026); U.S. Department of Education, Fiscal Year 2027 Budget Request, Special Education; Congressional Research Service, Status of FY2027 Labor, Health and Human Services, and Education Appropriations, R49344 (September 8, 2026); Education Commission of the States, K-12 Funding 2024: Special Education Funding (updated June 2026); U.S. Department of Education, press release on new interagency partnerships (June 16, 2026); NPR, Special education head at Education Department abruptly resigns (September 9, 2026); U.S. Department of Education, Office of Inspector General, Review of Changes in Staffing and Operations (June 2026); Congressional Research Service, Overview of Continuing Appropriations for FY2026, R48765 (December 15, 2025); U.S. Department of Education, OSEP, 2024-25 Static Tables (Part B Child Count & Educational Environments); Learning Policy Institute, An Overview of Teacher Shortages: 2026 (July 13, 2026). Sections of 34 CFR Part 300 and other sources are linked where they are cited.
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