The Time to Fix Special Education Funding in NJ is Now: New ELC Report Documents Disparities Resulting from Census-Based Funding

New Jersey’s school funding formula allocates resources for special education students using a census model that funds all districts using the statewide average classification rate – 15.9% in 2022-23 – regardless of whether the district’s actual classification rate is higher or lower, along with a per-pupil allocation based on the statewide average “excess cost” ($19,524 in 2022-23).

The Education Law Center report released today, A Roadmap for Improving New Jersey’s School Funding Formula: The Impact of Census-Based Funding for Special Education, shows that census funding does not appropriately fund districts for their actual special education needs and results in the inequitable distribution of state resources for students with disabilities.

The report, the second in the ELC series on the need to update New Jersey’s school finance formula, the School Funding Reform Act (SFRA), notes that New Jersey moved from a weighted system that differentiated state special education aid based on four different tiers of student need to the census model. Districts also receive additional funding for extraordinary special education to cover a percentage of high-cost special education placements.

The two core components of census funding have been criticized for failing to account for year-to-year and district-to-district variations in the characteristics of the special education population. Advocates, stakeholders, and researchers expressed disapproval of the switch to census funding even before the SFRA’s adoption in 2008. These concerns have been front and center at recent legislative hearings, with school district leaders repeatedly citing inadequate special education funding as one of the main stressors in their annual budgets.

The report demonstrates that this criticism is warranted and that census funding does not adequately meet the needs of New Jersey school districts or the students they serve.

Key findings include:

  • Classification rates for special education varied greatly among school districts in 2022-23, from a low of 3% to a high of 34%.

  • In 2022-23, 60% of school districts received funding for fewer special education students than they actually enrolled, a 12 percentage point increase from 2009-10, the year after the transition to census funding.

  • Districts with classification rates higher than the statewide average were underfunded by $378 million in 2022-23, leaving them to either raise additional local revenue or repurpose revenue intended for the general education program.

Inadequate funding for special education not only has the potential to compromise programs and services for classified students but can also impact the wider school community. Because of legal obligations to provide services for students with disabilities, inadequate special education funding may force school districts to cut general education programs to cover costs, unless they can raise additional local revenue.

Click here to find out how your district fares under the census-based special education funding model.

“New Jersey is one of just thirteen states that use a census-based model alone or as part of a hybrid system for funding K-12 special education,” said Nicole Ciullo, ELC Research & Policy Associate. “It’s clear that census funding does not meet the needs of the state’s school districts and it’s time to consider other options.”

“The state has a legal obligation to continually review the SFRA to ensure it is meeting the needs of students. With the FY2026 Educational Adequacy Report due within the next year, the state should use this opportunity to undertake a comprehensive review of the formula, including the method for funding special education,” said ELC Research Director Danielle Farrie. “But for that to happen we need the Legislature to appropriate funds in the FY25 budget for the Department of Education to support consultation with school finance experts and the solicitation of diverse community and stakeholder perspectives.”

Read the first report in the series, A Roadmap for Improving New Jersey’s School Funding Formula: The FY2026 Educational Adequacy Report, here.

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Sharon Krengel
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