$36 million for special education in jeopardy

South Carolina education leaders are gearing up for a fight with their federal counterparts about whether the state should lose $36 million for special education students next year.

Federal officials have said the state could lose a total of $111.5 million for students with disabilities because the state made budget cuts equal to that amount during the past few years without the U.S. Department of Education's approval.

The state must either restore that money to districts by Thursday or lose it going forward.

The state has cobbled together $75 million of the $111.5 million through an unexpected increase in state revenue and lesser-than-expected bus fuel costs.

It plans to appeal the mandate to give an additional $36 million to districts because it doesn't believe federal officials' interpretation of what happened in the past is correct, said Jay Ragley, the state Education Department's deputy superintendent for legislative and public affairs.

"If we're not successful, we will go to court," he said. "We will be fighting that $36 million cut for as long as we can and until we've exhausted all of our remedies."

The state's predicament is confusing and complicated, spanning multiple fiscal years and uncharted territory around providing waivers to states on spending for students with disabilities.

The heart of the problem is the state's failure to invest a certain amount of money into its special education programs to meet federal requirements. Federal law requires states to at least maintain their level of special education spending from year to year unless they receive permission from the U.S. Department of Education to invest less.

If a state fails to do this, it is at risk to lose money.

South Carolina has cut its special education spending in 2008-09, 2009-10 and 2010-11 without the go-ahead from the federal government. Federal officials examined the state's overall revenues and expenditures for those years and came up with what the state needed to put back into special education:

--$75.3 million came from the 2010-11 school year.

--$36.2 million from the 2009-10 school year.

The state's proposed budget includes two new requirements that should prevent the situation from happening again -- the state Department of Education is required to let the General Assembly know what the federal requirement is for investing in special education students, and if there is a cut, the department has pledged to do all it can to prevent cutting special education.

Going forward, the state Budget and Control Board and the Office of State Budget must sign off on the proposal to return $75 million to special education students. If that happens, the money would be distributed statewide to districts using the same formula to allocate special education dollars in 2010-11.

Districts either could use the money to pay for any outstanding invoices for the current year or carry the money forward for special education services for 2011-12.