The U.S. Department of Education withheld $36 million in special education funds from South Carolina earlier this month, carrying out a penalty imposed on the state for cutting its own spending on special needs students three years ago.
In what may be a first-of-its-kind penalty, the feds used a provision in federal law that allows cutting a state's special education grant, permanently, if the state slashes its special education budget without the right justification. UPDATE: Kansas' state grant for special education was also cut this month, by about $2 million.
The $36 million cut represents about a 9 percent deduction in South Carolina's special education budget. It won't be felt this year, however.
State Superintendent Mick Zais convinced the South Carolina legislature to appropriate one-time funds in case of this scenario. So, "South Carolina students will not be harmed or denied services this school year because of the federal government's draconian cut," said Jay Ragley, South Carolina's director of the office of legislative affairs.
But the catch with the federal penalty: It goes on forever. In other words, South Carolina's budget will be cut by $36 million this year and every year going forward.
"How does that solve anything?" Zais told me in August.
The state was denied a motion to stay the penalty in August, but it hasn't given up yet. However the Fourth Circuit Court of Appeals hasn't ruled yet on another request: a petition for a review of U.S. Education Secretary Arne Duncan's May 22 decision not to grant South Carolina a hearing over the issue.
Both sides must submit briefs to the court by Nov. 26, Ragley said.
The penalty stems from part of federal law that requires states to keep special education budgets steady, or boost spending, each year, keeping students with disabilities from going without needed services because of spending fluctuations.
South Carolina cut special education spending several years in a row, noting a decline in state revenue and reductions to other spending in 2008-09, 2009-10, and 2010-11. The Education Department agreed that some of the cuts were justifiable because of the state of the state's budget. But in 2009-10, South Carolina trimmed more than the Education Department felt was necessary, this letter says. UPDATE: In Kansas, the state was granted a waiver to cut more than $53 million from special education in 2009-10, but the state cut about $2 more.
Part of the 2010-11 cut originally was found to be unjustified, too, but the state quickly restored the funding to keep from facing a penalty over that money, too.
Until the recent recession, requests to chop state special education spending were almost unheard of. But several states have asked for, and been granted, waivers from the federal rule about maintaining spending levels using a clause that allows them to do so in the case of uncontrollable circumstances, including natural disasters or a precipitous and unforeseen decline in a state's financial resources.
The cuts were made before Zais was elected in 2010. In August, he said "to his credit, I think Secretary [Arne] Duncan is sympathetic," although "he has not said so directly."
A representative of the Education Department's office of special education said the cuts were imposed Oct. 1 "as required by the statute."