Rhode Island is the smallest state in the country, but it has every other state beat by one measure: A higher percentage of its students are in special education than anywhere else.

An analysis of U.S. Department of Education data shows that the percentage of students in special education varies widely among states. While Rhode Island tops the country at 18 percent, Texas, at 9 percent, is at the bottom. The average percentage across all states is 13 percent, and two-thirds of states are above that number, according to the data.

Those differences could have major financial implications for states. Special education funding can account for up to 20 percent of school budgets, according to a 2010 report by the Economic Policy Institute. Overall funding for special education has remained mostly intact during the recession, but looming cuts at the federal level could spell trouble if state and local resources, which already pick up most of the tab for special education, are stretched even further. Already, several states have asked for federal exemptions to allow them to cut special education support.

Schools have fairly high discretion in identifying special education students within the federal guidelines, according to officials at the Department of Education. Changing understandings of the disabilities, themselves, can also have an impact. Autism has been among the fastest growing categories in special education, but some researchers say that a proposed change to its medical definition would halt that growth.

Incorrectly placing students in special education, particularly minority students, is against the federal Individuals with Disabilities Education Act, or IDEA, first passed in 1975 and reauthorized in 2004. The law also requires that special education students, to the extent possible, be placed in traditional classes with non-special education students. But in practice those requirements can be interpreted differently across the country.

“If you have a struggling reader, there are some schools and or some states that will say immediately, we’re putting that kid in special ed,” says Alice Farrell, director of special education in Vermont. “There are other states, such as ourselves, that say, ‘let’s not do that, let’s diversify our education and handle it in the classroom.”

In Rhode Island, Elliot Krieger, a spokesman for the state’s department of education, had no explanation for why his state has the highest percentage of students in special education, a distinction it has held several times in the past few years. In Texas, Debbie Ratcliffe, a spokeswoman for the state’s education agency, says that the state’s lowest-in-the nation percentage is in part due to increased efforts to make sure students are accurately identified. “Just because they’re behind in a class, doesn’t mean they necessarily have a disability,” she says.

Stephen Frank, a director at Education Resource Strategies, a private consulting firm, says that putting too many students in special education is among the most inefficient practices in all of education. His company works with school districts to help them make the best use of their resources. He advocates for larger classes, co-taught by both general and special education teachers, or bringing specialists in to traditional classes to help special education students rather than sending those students out of the class for extra help. He also suggests that districts consider encouraging their traditional teachers to get cross-certified in special education, rather than relying only on additional special education teachers.

High identification rates aren’t in and of themselves a problem, says Tom Parrish, managing research scientist at the American Institutes for Research. He’s studied the education systems in California and Illinois extensively and found that many schools with high identification rates actually have better academic performance among special education students than other schools in the state. He argues that an emphasis on student outcomes needs to be part of the discussion on increased efficiency. “In some places we’re getting a much better return than other places,” he says.

One strategy many states are using to improve achievement and help prevent over-identification is giving all students baseline assessments at an early age to spot and treat learning disabilities. Students lagging behind are given additional support to get them back on track before they need special education services. For some students, this approach, called “response to intervention,” can be faster and more cost-efficient in addressing their difficulties than turning to special education, says Erika Hughes, in California’s Special Education Division. “You don’t replace your engine before you replace your spark plugs,” she says.

Funding models

Currently, states get federal special education money based on formulas that consider general population and poverty numbers, rather than the number of special education students. But many states give districts additional money for each special education student or service they provide, which some lawmakers and researchers think encourages over-identification.

The extra weight given to special education students in New Mexico’s funding formula, for example, has some lawmakers in the state concerned that some schools might be over-identifying borderline students to bring in additional funding. The report suggests moving to a system that gives districts funds based on their overall number of students and lets them decide how to spend the money.

That’s how California and six other states operate. Elizabeth Dhuey, an assistant professor of economics at the University of Toronto, studied those systems in an article published last spring in the journal Education Finance and Policy. She and co-author Stephen Lipscomb found a 10 percent decline in special education enrollment rates between 1991 and 2003 in states that adopted the census-based system.

A census-based model, however, doesn’t automatically mean a small percentage of students in special education. While four of the seven states using that model have special education percentages below the national average, the other three — Massachusetts, New Jersey and Pennsylvania — have among the top six rates in the country.

Cuts on the horizon

When IDEA passed in 1975, Congress said that it would provide states with an additional 40 percent of the per-pupil cost of education each year to cover the higher cost of special education. It’s never hit that mark, and research suggests that state and local sources pay for as much as 90 percent of the actual cost of special education.

States got increased special education funding in 2009 as part of the American Recovery and Reinvestment Act, but despite the extra federal dollars, some states cut spending on special education during the recession. Legally, states can’t reduce these funding levels from the previous year, but in the past two years, seven states have applied for waivers from the Department of Education, and four were approved.

They could soon have more company. If the Budget Control Act of 2011 goes into effect, special education would be among the many federal programs hit with an 8 to 9 percent cut — a reduction of about $1 billion in special education aid. Taken with cuts to other federal funds, Lindsay Jones, senior director for policy and advocacy at the Council for Exceptional Children, says she doesn’t know how states will cope without the special education money. “It is going to be a huge cut,” she says. “It will be felt in every school in the nation.”

Stateline.org is a nonpartisan, nonprofit news service of the Pew Center on the States that reports and analyzes trends in state policy.