Operating Monies for Special Education
Special education funding from the state is distributed on a per-pupil basis for some Michigan districts and on a per-pupil and categorical basis for other districts.[cxxv] Some districts receive more than one type of categorical payment for special education, while others receive an additional amount for students who are in the care of various government institutions or in alternative residential arrangements ("section 53a" students). In the short sections below, we will focus first on conventional school districts, beginning with those districts’ special education foundation allowance, which is the per-pupil calculation for the state’s special education payments.
The Special Education Foundation Allowance
Unlike the foundation allowance for general education students, the foundation allowance for special education students is paid entirely by state government (and federal government, with the state disbursing the federal monies). The state’s per-pupil money for special education — as opposed to categorical money for special education — is computed by multiplying the number of special education FTE students in a particular conventional local school district by the lesser of the state’s maximum foundation allowance and the district’s foundation allowance (including the 20j supplement[cxxvi] in the case of hold-harmless districts). State per-pupil money for special education follows similar lines for charter schools and ISDs, as will be described in more detail below.
This special education expenditure is referred to by the Michigan Department of Education as the "special education foundation." We will refer to this total amount as the "special education foundation allowance," although the per-pupil amount is often the same as the foundation allowance the district is assigned for general education pupils.[cxxvii] In calculating this allowance, the state assumes that all of the money comes from nonlocal sources; revenue from maximum local property tax millages is not considered.
The money that a district receives for the special education foundation allowance is calculated separately for two different types of students: "high incidence" students, who experience more common learning impairments, such as hyperactivity, and "low incidence" students, such as blindness. Note that the calculation is split for bookkeeping purposes only; both types of students receive the same per-pupil foundation allowance.
In education finance calculations, high incidence students are often referred to as "section 52"[cxxviii] students, and "low incidence" students are often referred to as "non-section 52 students" or "section 53 students."[cxxix] These designations refer to the State School Aid Act’s sections 52 and 53, which identify how part of the districts’ per-pupil special education operating monies are allocated to educate these pupils.
Some districts have both types of pupils. For example, Otsego Public Schools had 62.73 FTE students categorized as "section 52" special education students and 0.79 FTE students categorized as "section 53" (or "non section 52") students, according to January 2007 data.
51a(2)(a) Calculation: Foundation Allowance for ‘High Incidence’ Students
For education finance purposes, "high incidence" or "section 52" students are those special education students who do not meet the following criteria:
They participate in special education programs financed under section 53a of the State School Aid Act;
The total special education foundation allowance for high-incidence students is determined by multiplying a conventional public school district’s foundation allowance or the state maximum foundation allowance, whichever is less, by the number of FTE "section 52" students. The calculation is slightly different for non-hold-harmless and hold-harmless school districts, as the following examples show.
Example 1: The Non-Hold-Harmless Brandywine School District. The January 2007 state aid financial status report for Brandywine School District shows the district receiving money for 48.25 special education FTE students who met the requirements described above and can be included in the calculation of the special education foundation allowance. Given these January 2007 figures and the district’s foundation allowance of $7,085, in fiscal 2007 the state must send Brandywine
Brandywine Section 52
Special Education Foundation Allowance Monies2007 =
48.25 x $7,085 = $341,851.25.
Example 2: The Hold-Harmless East Lansing School District. With hold-harmless districts, the state pays both the special education foundation allowance and the 20j hold-harmless supplement for special education students, but only up to the state maximum foundation allowance.[cxxxii] For example, the East Lansing School District, a hold-harmless district, has a district foundation allowance in fiscal 2007 of $8,203 and a 20j hold-harmless payment of $314.45. Because the sum of $8,203 and $314.45 is $8,517.45 — greater than the $8,385 state maximum foundation allowance — the district receives $8,385 per section 52 special education FTE student. Assuming the district has no nonresident FTE students,[cxxxiii] the payment would be
East Lansing Section 52 Special Education Foundation Allowance Monies2007 =
$8,385 x 131.43 = $1,102,040.55.
The special education foundation allowance for charter schools follows the same lines as that for conventional public school districts: The state simply pays the charter school the school’s own foundation allowance multiplied by the school’s number of section 52 FTEs.
Intermediate school districts can receive a section 52 special education foundation allowance when a student is not enrolled in a conventional local school district or a charter school and receives educational services from the ISD. In this instance, the special education foundation allowance for this pupil is the allowance the student would receive in his or her resident conventional local school district, including a 20j supplement if the student resides in a hold-harmless district. As with the conventional local school districts, the state’s payment is capped at the state maximum foundation allowance.
51a(12) Calculation: Foundation Allowance for ‘Low Incidence’ Students
The state makes foundation allowance payments to conventional school districts, charter schools and intermediate school districts for "section 53" students, who are students who meet the following criteria:[cxxxiv] 
Students assigned by a court or a state agency to a local school district in an intermediate school district in which the student does not reside, or to an intermediate school district in which the student did not reside when the student "came under the jurisdiction of the court or a state agency;"
Students who live in community health nstitutions;
Students who were residents of "community health institutions for the developmentally disabled" who are subsequently "placed in community settings other than the pupil’s home";
Students attending an "on-grounds educational program" approved by the state Department of Education for between 181 and 233 days or at a "residential child care institution" that offered such a program in 1992;
A student whose parent places him in a district "for the purpose of seeking a suitable home, if the parent does not reside in the same intermediate [school] district in which the pupil is placed;"
Students not designated as "special education students" but who receive services from an ISD in a "juvenile detention or child caring facility;"
Students enrolled in an ISD who are "emotionally impaired" and are served by a community health program.
The total special education foundation allowance for these low-incidence students is determined by multiplying a conventional local school district’s foundation allowance or the state maximum foundation allowance, whichever is less, by the number of FTE "section 53" students. Below we show an example of this calculation for both a non-hold-harmless and a hold-harmless school district.
Example 1: The Non-Hold-Harmless Otsego Public Schools. For instance, Otsego Public Schools has 0.79 FTE students categorized as "section 53" students. Otsego’s foundation allowance is $7,085 in fiscal 2007; therefore, based on January 2007 figures, Otsego would receive the following in 2007:[cxxxv]
Otsego Section 53
Special Education Foundation Allowance Monies2007 =
$7,085 x 0.79 = $5,597.15.
Example 2. The Hold-Harmless Farmington Public School District. The Farmington Public School District has a foundation allowance of $10,261 in fiscal 2007 and a 20j payment of $191.22. Since the sum of these payment exceeds the $8,385 state maximum foundation allowance, the district receives $8,385 as the total foundation allowance for the 55.85 section 53 special education FTE students enrolled in January 2007. Based on January 2007 figures, the district in fiscal 2007 would receive the following:
Farmington Section 53
Special Education Foundation Allowance Monies2007 =
$8,385 x 55.85 = $468,302.25.
As with conventional school districts, the state pays charter schools a special education foundation allowance for low-incidence special education students by multiplying the charter school’s foundation allowance by the school’s number of section 53 FTEs. The state also makes special education foundation allowance payments to intermediate school districts that educate low-incidence special education students when those students are educated by the ISD and are not enrolled in a conventional local school district or charter school. The state’s payments to the ISD are calculated by multiplying the number of qualifying students by the special education foundation allowance of the conventional local school district in which the student resides.
Categorical Special Education Payments
51a(2)(b) Calculation: ‘Special Education Payment’
Many districts receive a categorical special education payment in addition to the per-pupil special education foundation allowance. Districts qualify for these additional categorical grants whenever the district’s special education revenue under section 51a(2)(a) (see above) does not equal the sum of 28.6138 percent of the total approved[cxxxvi] "Special ed Costs" and 70.4165 percent of the total approved "SE Transportation Costs" (these percentages were calculated during the Durant v. State of Michigan lawsuit).[cxxxvii]
The figures necessary for this calculation are available from each district’s state aid financial status report. For example, Brimley Area Schools has 11.55 special education section 52 FTE students,[cxxxviii] and its foundation allowance is $7,085. The state pays thus pays the district $81,831.75 in special education foundation allowance money for special education expenditures:
Brimley Section 52
Special Education Foundation Allowance Monies2007 =
11.55 x $7,085 = $81,831.75.
However, this amount is not sufficient to cover the sum of the specified percentages of special education program costs and special education transportation costs for the district. According to the district’s state aid financial status report, Brimley’s state-approved special education cost is $291,750, while the district’s approved special education transportation cost is $111,941. The guaranteed minimum in special education funding — that is, the sum of the two percentages applied to these costs — is
Guaranteed Minimum Special Education Monies =
Sum of Percentages of Costs of Special Education and Special Education Transportation =
(28.6138 percent x Special Education Costs) +
(70.4165 percent x Special Education Transportation Costs) =
(0.286138 x $291,750) + (0.704165 x $111,941) = $162,305.70.
Since this sum is greater than the $81,831.75 in per-pupil foundation allowance monies that Brimley receives for its special education FTE students, the state must make up the difference between the two figures:
$162,305.70 − $81,831.75 = $80,473.95. [cxxxix]
This additional state expenditure is referred to by the state Department of Education as a "special education" payment and denoted as being related to section 51a.[cxl]
Intermediate school districts[cxli] and charter schools receive the categorical 51a(2)(b) payment based on the same calculation as conventional local school districts: They receive any positive difference between the guaranteed minimum special education monies for the ISD or charter school and the section 51a(2)(a) payment.
53a: Court- and State Agency-Placed Students
The state pays an additional categorical grant to conventional local school districts, charter schools and intermediate school districts for educating certain low-incidence special education pupils. Such students are described in section 53a of the State School Aid Act and are discussed above.[cxlii] The state makes this payment based on "the total approved costs of operating special education programs and services approved by the department" for section 53a pupils. The monies paid for such students under the special education section 53 (low incidence) foundation allowance are subtracted from the total approved cost, and the difference is disbursed by the state to local districts, charter schools and ISDs as this categorical payment for "53a: Court and Agency Placed Students."
51a(6): Special Education Rule Change Cost Increase Reimbursement
On July 1, 1987, the State Board of Education made changes to certain special education rules. These revised rules "provided more flexibility to school districts in serving students with disabilities, [but] some rules provided more stringent standards," according to a memo from the Michigan Department of Education. The Education Department agrees to authorize the full reimbursement to local and intermediate school districts[cxliii] of the increased costs they incurred in complying with these rules. To receive a reimbursement payment, local and intermediate districts must demonstrate that they meet certain criteria. In 2007, the total amount appropriated for these special education rule change costs was $2.2 million.
51a(3) Calculation: Special Education "Hold Harmless" Payment
If the sum of money from the special education foundation allowances and the categorical "special education payment" is not equal to the amount a conventional local school district, intermediate school district or charter school received in 1997 for special education programs and services and special education transportation, the district or charter school receives from the state an amount equal to the difference between those 1997 costs[cxliv] and the current special education program and transportation costs multiplied by the percentages discussed above, adjusted for "reductions in special education operations and programs" since 1997.[cxlv] This expenditure is referred to by the Department of Education as a special education "hold harmless" payment.[cxlvi] In fiscal 2007, the amount appropriated for these payments is $1.6 million.
Other Special Education Payments to ISDs
Intermediate school districts receive other payments for special education. One payment, calculated under section 51a(8), totaled $15,313,900 in fiscal 2007 and appeared to defray personnel costs. This sum is listed on ISDs’ monthly state aid financial status reports as "Center Program FICA/Retirement."[cxlvii]
ISDs also receive payments for students who attend programs of the schools of the deaf and blind. The amount paid to ISDs is to be "proportionate to the total instructional cost at each school" and is not to exceed $1,688,000 in fiscal 2007. (The schools for the deaf and blind are discussed briefly under "Michigan Department of Education.")
Some ISDs may receive a "millage equalization" payment for special education. This payment allows districts with a total taxable value per pupil[cxlviii] below a certain amount — $151,300 in fiscal 2007 — to receive a sum of money from the state that complements the ISD’s special education tax so that the combined revenue yields what the district would receive from the special education tax alone if the ISD had the state’s specified per-pupil taxable value. To calculate the per-pupil payment, the ISD’s per-pupil taxable value is subtracted from $151,300, and the difference is multiplied by the ISD’s special education property tax millage.
[cxxv] Note that districts that use special education funding for purposes other than those related to providing special education may be required by the state Department of Education to refund the money, which would then be credited to the state school aid fund (MCL § 388.1651a(11)).
[cxxvi] The 20j supplement is discussed previously on The Foundation Allowance: General Education cont....
[cxxvii] See, for example, “State of Michigan 2006-2007 State Aid Financial Status Report: Payment Dated 01/19/2007,” 4.
[cxxviii] “Section 52” is shorthand for MCL § 388.1652. (The first five digits of the MCL citation are understood from the reference to the State School Aid Act, which begins at MCL § 388.1601.)
[cxxix] Technically, the distinction in the State School Aid Act calculations is not really between section 52 and section 53 students, but between section 51a(2)(a) and section 51a(12) students. We mention sections 52 and 53 in the text because they are the categories referred to in state aid financial status reports. Also note that section 53 has been repealed from the State School Aid Act.
[cxxx] All students fall within the boundaries of an ISD, but some students are not registered in a conventional local school district or a charter school; rather, they are registered only with their ISD.
[cxxxi] This three-point list of students not included in calculating the special education foundation allowance for high-incidence students corresponds to the seven points presented in “51a(12) Calculation: Foundation Allowance for ‘Low Incidence’ Students,” of this section. The first five points describe section 53a students (point No. 1 above), while the remaining two bullet points correspond to the final two groups of students described above.
[cxxxii] The 20j payment for general education students is discussed earlier under “The Foundation Allowance: General Education cont....”
[cxxxiii] The district actually receives a total of $1,070,793.54; this number is obtained by subtracting the nonresident FTE student adjustment from the figure calculated above. In other words, the adjustment is $1,102,040.55 - $31,247.01 (the adjustment for nonresident section 52 special education FTEs) = $1,070,793.54.
[cxxxiv] Strictly speaking, students falling under the first five criteria are the only “Section 53” students; the remainder the students appearing on the list are actually described in section 51a(12). The state, however, describes all of these students as “section 53” students when dealing with conventional local school districts and charter schools. For an example, see “State of Michigan 2006-2007 State Aid Financial Status Report: Payment Dated 01/19/2007,” 14.
[cxxxv] See Ibid., 15-16. This is the amount listed on the state aid financial status report line titled “51a12 Special ED Foundation (Non-Sec 52).”
[cxxxvi] For a list of special education program and transportation cost categories approved for districts in 2007, see Jacquelyn J. Thompson, “Closing out the 2005-06 School Year Special Education Accounts and Funding Information for the 2006-07 School Year,” (Michigan Department of Education, 2006), 20-28, 36-39, www.michigan.gov/documents/OSE-EISMemo06-07_157181_7.pdf (accessed Feb. 14, 2007).
[cxxxvii] Specifically, these percentages were adopted by the Michigan Court of Appeals in its initial ruling in the case (Durant v. Dep’t of Educ., 213 Mich App 500, 505 (1995)).
[cxxxviii] This categorical payment involves only section 52 students (note that the calculation takes place under section 51a(2)(b)). In a hold-harmless conventional local school district, the calculation of the section 52 foundational allowance may include the 20j supplement (up to the state maximum foundation allowance in total).
[cxxxix] The difference between these two numbers in the district’s state aid financial status report is actually $80,473.94. The difference between that figure and the figure calculated above appears to be due to rounding.
[cxl] For an example, see “State of Michigan 2006-2007 State Aid Financial Status Report: Payment Dated 01/19/2007,” 4.
[cxli] Intermediate school districts can receive a categorical 51a(2)(b) payment when a student is not enrolled in a conventional local school district or a charter school and receives educational services from the ISD.
[cxlii] See the types of students described in items 1 through 5 in the section entitled "51a(12) Calculation: Foundation Allowance for ‘Low Incidence’ Students.'"
[cxliii] Charter schools do not receive the payment because they did not exist in 1987.
[cxliv] These are the nominal 1997 costs; they are not adjusted for inflation.
[cxlv] MCL § 388.1651a(3); these adjustments are made “in a manner determined by the [state] department [of education],” according to § 1651a(3). For the state’s payment calculations under this section, see www.michigan.gov/documents/sehh_79613_7.xls.
[cxlvi] See, for example, “State of Michigan 2006-2007 State Aid Financial Status Report: Payment Dated 01/19/2007,” 2.
[cxlvii] See, for example, Ibid., 95.
[cxlviii] This taxable value includes all real and personal property within the borders of the ISD. The pupils counted here include all general and special education FTEs enrolled in the ISD’s constituent school districts.