Fiscal Impact of Special Needs Vouchers Hits Declining Enrollment Districts Doubly Hard

school_vouchersLate last week, the Department of Public Instruction (DPI) announced 2016-17 enrollment figures for the state’s various private school voucher programs.  This included the first year of the Special Needs Scholarship (voucher) Program and the Wisconsin, Racine, and Milwaukee voucher programs.

Altogether, the state will spend nearly a quarter of a billion dollars ($244 million) in 2016-17 on the various voucher programs it has authorized. This post examines the scope and impact of special needs vouchers.

Twenty-two school districts, including MPS, will lose a combined $2.4 million in state aid this year to fund vouchers for 202 students with disabilities in private schools. Eleven of the 22 districts will lose additional amounts of revenue because they are in declining enrollment.  MPS, the state’s largest district, will likely lose an additional $1 million in revenue limit authority in addition to lost aid, while other districts will lose smaller amounts.

Figures released late last week show 206 individual students with disabilities, which translates to 202.4 full-time equivalent (FTE) students (a 4-year-old kindergarten student may be counted as 0.5 FTE or 0.6 FTE, for example) will receive taxpayer-funded vouchers to attend a private school under the special needs voucher program in the 2016-17 school year. Many of these new vouchers are supporting children who were already attending private schools.

Each participating private school receives a voucher payment of $12,000 per (FTE) student, regardless of the severity of the child’s disability or disabilities.

The full $12,000 cost of the voucher is deducted from the general aid allotment of the public school district where the special needs voucher student resides. If the school district’s general school aid payments are not sufficient to cover the full cost of the special needs voucher, the remaining amount is deducted from other state aid payments the district will receive.

Districts may recoup a portion of the lost aid as special needs voucher students are included in the resident public school district’s membership for state general aid and revenue limit purposes; however, most districts will still face an ongoing shortfall of $2,000 or more per participating child each year.

Further, for districts in declining enrollment the revenue hit will be greater than just the lost aid. Eleven of the 22 districts (i.e., Arrowhead, Cudahy, MPS, North Lake, Racine, Swallow, Watertown, Waukesha, Wauwatosa, West Allis, Whitefish Bay) are in declining enrollment and will lose revenue under both the base-year guarantee and the declining enrollment exemption, two features of the revenue limit formula intended to protect districts against the effects of declining enrollment on district revenues. The affected districts will lose roughly equal amounts of revenue under each provision.

There is no income limitation on eligibility for a special needs voucher. So, in addition to the $12,000 voucher payment it receives from the state, a participating private schools will be able to charge tuition and fees above and beyond the voucher payment

The special needs voucher program was originally created — with little debate — as part of the 2015-17 state budget.  Under the program, as originally approved, in order to be eligible for a special needs voucher, a student had to be enrolled in a public school district for the entire previous school year, have an Individualized Education Program (IEP) or services plan is in effect, and have been denied a seat through the Public School Open Enrollment program.

However, alternative eligibility criteria were subsequently written into the law late in the 2015-16 legislative session. Those criteria, which specifically apply only for the first year of the program, allowed students who were not attending a public school for the entire prior school year to be eligible for a special needs voucher if they both had an IEP or services plan that was developed or implemented between July 1, 2011, and June 30, 2016, and met the open enrollment denial requirements between the 2011-12 and 2015-16 school years.

As this article in the Milwaukee Journal Sentinel notes, a number of private schools have taken advantage of the second option — available for just one year — to shift some of their existing special-education students into the program. And, once those students are in the program, they can stay in until they graduate.

The Journal Sentinel article notes:

“The second option is how Lake Country Lutheran High School (which the article elsewhere points out will receive $108,000 this year for nine students who qualified for special-needs vouchers, including five who were already attending the school) got new resources for some of its existing students. And it’s also how St. Marcus Lutheran School, where almost all children attend with a Milwaukee Parental Choice Program voucher worth about $7,300 annually, shifted almost 70 students onto special-needs vouchers.

“St. Marcus leaders directed their parents of children with disabilities to apply for open enrollment at suburban districts that they knew had no seats available and that they knew their parents had no desire to attend. Once the districts denied the applications, the St. Marcus children were eligible for hew higher paying vouchers.”