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Sending Public School Students to Private Schools

Friday, January 1, 1999

The untold story of special education

One of the most common arguments against school choice is that it will create a system of privilege that prefers only the easiest students to teach. Opponents of vouchers argue that because public schools are meant to serve children of all backgrounds—including children with disabilities—school choice promises only to harm these students as scarce resources are siphoned off to private schools. If vouchers were adopted on a large scale, so these people claim, the neediest students would only be left behind to suffer neglect in crumbling, deserted schools.

Upon greater scrutiny, this oft-repeated scenario does not hold up. For years, many students with the worst disabilities have attended private schools at partial or even full public expense. Far from abandoning the needs of special education students, the private sector is supplying what the public school system has failed to provide.

More specifically, public school districts currently foot the bill for more than 100,000 special education students attending private schools at an estimated cost of $2 billion to taxpayers, according to U.S. Department of Education figures and industry estimates. In most of these cases, public schools have come to rely on specialized private schools to educate their toughest disability cases, when doing it themselves would be prohibitively expensive.

"A voucher isn’t really the right analogy," says Mike Petrilli, program director of the Thomas B. Fordham Foundation, which supports education reform efforts from a conservative perspective. "It’s really closer to contracting, like the Edison Project," the for-profit school management company that manages more than 50 public and charter schools across the nation. "But it makes a lot of sense to contract out this function to a company that can pool its resources."

Petrilli is right. The current set-up can’t be called a voucher system, because public school districts are occasionally compelled by the courts to send their students to these schools—whether because of negligence, incompetence, or some other reason. But more importantly, public school officials serve as the gatekeepers during the placement process, such that most parents don’t really ever get to make an unencumbered "choice" for their child to attend one of these schools. Of course, some parents with savvy attorneys may be able to swing a private school placement through more aggressive arm-twisting, but many less wealthy parents aren’t aware they can so affect the process.

But these differences aside, one important similarity between private special education placements and a larger system of school choice cannot be easily dismissed: school districts have made a market-based decision to contract with these schools because they provide specialized services that public schools cannot easily replicate on their own.

Today, the private special education sector includes more than 3,600 outside providers that educate many of the nation’s most difficult disability cases, including large numbers of students with serious emotional disturbances and the more intractable learning disabilities. These schools include both day and residential institutions, some of which operate in a hospital-like setting.

Put in perspective, however, these 100,000 students still amount to a relatively small slice of the large special education population nationally—only about 1.8 percent of the 5.6 million special education students who are mostly served in public schools. Department of Education figures show that 61,608 students attend private special education schools at full public expense, while 65,960 disabled students attend private schools through partial public support. Although perhaps few in number, this small percentage of students consumes 7.3 percent of the $32.6 billion that the Center for Special Education Finance says is spent annually by federal, state, and local governments on special education.

Private special education schools "often have the appearance of being a higher-cost provider relative to public schools, when in fact they may be competitive or even lower cost than the public schools for a given type of student," writes Janet Beales in her 1996 Reason Foundation study, one of the few in-depth reports to examine the field. "The full costs of nonpublic schools are easily identified, whereas the costs of public services are often incompletely reported to due to cross-subsidizing, excluded costs, and other reporting errors."

Placement Disputes

While some states have had subsidized private special education for quite some time, the current state of the industry is traced to the passage of the Education of All Handicapped Children Act of 1975, which effectively created a federal entitlement to education for disabled children. Before then, many disabled students didn’t attend school at all or were hidden away from the rest of the school population in questionable and even shocking situations.

The law has since been renamed the Individuals with Disabilities Education Act, or IDEA, but its most basic mandate has not changed: that states provide a "free appropriate public education," or FAPE, individually tailored to each disabled child’s needs. Under the current system, school administrators must find and diagnose disabilities, then decide on a case-by-case basis what educational and health-related services are "appropriate" in order for each disabled child to receive an adequate education. Again, school administrators determine whether public schools can provide the needed services or if a private provider should be called in.

Not surprisingly, this process varies wildly from district to district. In fact, a student diagnosed with a significant disability in one district or state may be seen as normal in another. Take Hawaii, for instance: only 7.3 percent of its school-aged children have been diagnosed as disabled, while 14.5 percent of all children in Massachusetts have been classified as having disabilities. The open-ended FAPE provision, which for the most part limits neither costs nor services, has become a hotbed of expensive litigation. As parents clash with schools in highly-publicized legal battles, the courts have become the testing ground of what services schools are obligated to provide their students. Often, these cases verge into outrageous territory, with the courts ruling that schools must pay big sums for nurses to trail students during the school day or administer complicated medical care as a necessary part of a child’s education. Sadly, schools that offer a wide range of services without legal intervention are often financially punished when a flood of disabled students move into their districts to take advantage of the better programs. In some ways it is this pattern that has let the legal system set the course for special education in our schools.

IDEA also requires that each disabled child’s education be provided in the "least restrictive environment." This requirement falls in line with the trend toward greater "inclusion" of disabled students among non-handicapped children, one of special education’s many brewing controversies. These days, however, outside providers are seen by many parents as more responsive than public schools since they have the specialized resources and a more focused approach to the needs of these students.

Public schools have come to rely on specialized private schools to educate their tougest disability cases when they’re too difficult to handle.

In fact, the parents of nearly 66,000 disabled children are currently opting out of the IDEA placement process in exchange for private education that is only partially subsidized by the government. This movement is a clear criticism of public management.

Sometimes, these partial subsidies result from public disagreements over a child’s special education placement. Say, for example, that school officials believe their facilities are adequate to educate a child, but that child’s parents still find them wanting. In such a case, the public school may invite the parents to use the federal share of the cost of their child’s education—on average about 11 percent of the total—to underwrite the cost of a private school tuition. Because these placements are still managed by public officials, however, many parents forego even this partial subsidy, accepting the full cost of private education as the price of their individual choice.

Spending Games

So where are private special education schools most prominent and for whom are they most useful? The truth is that little research has been done on special education outcomes or the average state spending per disability in private schools.

In general, students attending specialized private schools tend to have more severe disabilities. Department of Education data from 1991 show that states rely on private providers mostly to serve students with serious emotional disturbance (29,515 students nationally), serious learning disabilities (8,159), multiple disabilities (7,311), and mental retardation (7,172). And according to the U.S. Department of Education, in that same year 55 percent of students with traumatic brain injuries (983) were privately placed.

Several states consistently contract with private schools to provide special education, says Sherry Kolbe, executive director of the National Association of Private Schools for Exceptional Children. Kolbe’s group represents more than 800 private special education providers across the nation that serve students with disabilities ranging from epilepsy to spina bifida. Although it’s not a voucher system that keeps these institutions in business, the success of private industry and nonprofit groups to establish a beachhead of privatization in special education speaks volumes in support of the claim that markets would evolve under vouchers to serve the neediest students.

Ironically, it turns out, many of the states that do the most contracting with private special education providers normally oppose the use of private school vouchers in education. Those states, mostly in the Northeast, include California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, and Rhode Island. The District of Columbia and Puerto Rico also have large percentages of special education students enrolled in private schools, while the South lags in providing such services, Kolbe says.

According to Kolbe, some private special education schools have been around since the turn of the century and have influential community members on their boards. Higher-than-average state investment in such schools isn’t a sign of runaway spending, she argues, but a prudent use of resources that often saves money. Greater investment in such schools is a sign of social responsibility, Kolbe argues, and "the states with more identifications are the ones who aren’t afraid to say this kid needs extra help."

Still, a person not familiar with the costs of special education may be hit with serious sticker shock. This year in Bergen County, N.J., for example, tuitions range from $19,881 to $39,562 a year for private schools that serve the disabled. This last figure is more than four times the average per pupil expenditure in the state of New Jersey, which leads the nation in per capita public school spending.

Nationally, industry estimates peg the average day tuition at $22,000 and residential tuition at $60,000 for private special education schools that contract with public schools. Meanwhile, annual tuition can be as low as $2,000 at some religious special education schools.

So how could the school choice movement affect special education? Although she does not take a formal position on vouchers, Kolbe thinks more choice in general could benefit both parents and students in the current system.

Too often, she says, local school districts play a cruel game of keepaway with parents that boils down to a concern for money and general distrust of private providers. Just as in bilingual education, schools get money from the state and the federal government for each disabled child, and parting with that money does not come easily to bureaucrats. "Any money they give to our programs, they can’t spend in the public schools," Kolbe says. "The main concern is that they might have to pay public dollars for private education," even if private options are more cost-efficient and public schools lack specialized resources.

For example, Kolbe says, public schools hire speech therapists at a higher cost than a private school would pay to give a child more intensive, personalized instruction. Contracted services like these could even be provided on a part-time basis, in situations where private school educators—not for-hire specialists—visit the public schools. "You’re basically throwing money away," she argues. "There should be more of a realization that our schools provide one-on-one instruction to help students get past their problems and return to regular schools."

States that contract the most with private special education providers normally oppose the use of private school vouchers in education.

At the same time, while public school administrators have the right to decide what resources are necessary to provide each student’s free and appropriate public education, Kolbe says many school leaders go to extreme lengths to keep parents from learning more about private options.

The newly reauthorized IDEA is supposed to lessen the antagonism between parents and school officials, but some observers wonder if it goes far enough. The new law gives parents more say during the legally mandated placement hearings—where their child’s placement is first authorized—but nothing ensures that advice will be heeded. The refurbished law also requires mediation in times of dispute, but school leaders have a spotty record when it comes to following the law, some observers point out. "We’ll see if it makes any difference," Kolbe says.

On the other hand, giving parents the opportunity to flex real decision-making power in the special education placement process could make it less adversarial. "You could cut down on a great deal of the lawsuits if parents felt they had a stake," says Petrilli of the Fordham Foundation.

Congress is also mulling steps to end the gold-rush atmosphere of special education law by limiting attorney fees to prevailing community wages. Already, it has used Washington, D.C., as its test subject. Included in this year’s D.C. appropriations law is a provision that limits attorney fees for special education to $50 an hour, capped at $1,300 per student.

Of course, not everyone is a believer. Robert Wagner, executive director of the 1,500-member Education Law Association, worries that encouraging more private outsourcing will open the floodgates to even more claims. Parents who want costly additional services for their children might look harder for them in an environment where a vague law leaves special education programs to be sorted out by attorneys. "It’s like a person saying, ‘I’m taking Spanish, so I need to go to Spain to learn it,’" Wagner says. "That may be true, but is it entitled under the statute?"

Choice Consequences

Ardent advocates of school choice are just beginning to consider how a wholesale voucher system might affect special education. It is their hope that public and private schools can cooperate to solve several of special education’s more nettlesome problems: overdiagnosis of special needs, cost containment, and inclusive classrooms.

According to Department of Education figures, the population of students marked as disabled in public schools continues to mushroom at an alarming rate in relation to overall school population. Meanwhile, the private school special education population has remained steady for the last decade. This single fact has led many to question whether perverse funding incentives are causing public schools to overdiagnose their students as disabled. Would a market in special education continue this trend or act to correct it?

In particular, public schools recently have been criticized for overdiagnosing Attention Deficit Disorder (ADD). Last year, the number of students diagnosed with "other health impairments," which include ADD, jumped an incredible 24.5 percent to 133,354 students nationwide, according to the industry newsletter Special Education Report. Would a competitive market in special education really be more accountable? Although private providers generally treat the profoundly disabled, ADD students might be perversely attractive to an open market. If the per-pupil funding for ADD were higher than for other students, but the actual cost to educate them was lower than public estimates, private special education might make a market in these children for itself.

Many have asked whether perverse funding incentives are causing public schools to overdiagnose their students with disabilities.

More favorably, vouchers could limit how much taxpayers must pay to educate the disabled and begin a movement toward cost containment. For planning purposes, private special education administrators would need to know how much funding the government would provide for each disability. Deciding what each disability is worth, however, would be anathema to those advocates for the disabled who put no price on the cost of special education.

Unlike the government, which can afford a whatever-it-takes approach to budgeting, private institutions are constrained by the grim reality of the bottom-line. "It would probably end up looking like a managed health-care plan," Petrilli says, "where an HMO decides how much to pay for each procedure."

Critics charge that vouchers would leave some students behind in an effort to cut costs. Sherry Kolbe of NAPSEC worries that vouchers would never cover the full amount of private school tuitions, but others believe that the industry would likely redesign its cost structure to accommodate local vouchers without sacrificing quality. "A lot of fat in the system is driven by regulations," says one analyst, who spoke on the condition of anonymity since his company does business with local school districts.

Private industry is better at tracking consumer wants and needs. Consequently, vouchers might help settle the debate over inclusion now raging in special education circles.

The practice of inclusion, where disabled students are placed in classes with fully-abled peers, is acclaimed as a way to boost the confidence and academic achievement of disabled students.

While inclusion is heavily supported by the Clinton administration and most advocates for the disabled, the majority of parents are less thrilled, saying the extra attention paid by instructors and classroom assistants to disabled students comes at the expense of their own children. In a recent Phi Delta Kappa/Gallup poll, inclusion was opposed by 65 percent of adults who agreed with the statement that disabled children "should be put in special classes of their own." Even some special education parents are doubtful about inclusion, since regular classroom teachers and their assistants don’t always have the necessary training to teach special needs students.

The industry analyst cited above envisions a scenario where voucher-bearing parents of disabled students will effectively hold a referendum on inclusion by choosing whether to stay in public schools or take their business elsewhere to private providers.

In a full voucher system, where the public and private sectors compete to sell the unique strengths of their programs, parents would have a greater opportunity to select what form of education is best for their child.

"It’s going to be interesting to see what they choose."