When public schools or agencies cannot serve a particular student, they may contract with a nonpublic school to educate that student. Nonpublic schools are privately operated nonsectarian schools which are registered or licensed with the state to provide special education and related services under contract with government agencies. Tuition at nonpublic schools is at public, not parent, expense. The U. S. Department of Education (using state-reported data) reports that just over two percent of the nation’s special-education population, or 100,700 students, attend private-sector schools, which can include residential care.10 Of that number, 43,795 students are placed in private schools at private expense.11 Another 3 percent, or 159,000 students with disabilities, attend school in separate public facilities.12 (Note: These figures significantly understate private and nonpublic school enrollment because of state reporting omissions.)

The 1994-95 Directory For Exceptional Children, lists roughly 3,000 private and nonpublic special-education schools and facilities.13 Nonpublic schools tend to be narrowly focused, developing expertise at serving children with specific disabilities. Nonpublic-school costs vary widely, depending in large part on the nature of the disability category served. The cost of educating a student in a nonpublic school may also include the cost of residential and medical care, and transportation.

For example, the nonpublic Highland Hospital and Homewood School in Asheville, North Carolina, provides residential, hospital, and educational care to socially maladjusted children requiring intensive psychiatric care. In 1994-95, Highland Hospital and the Homewood School served 27 boys and girls ages 12-18 at a per-pupil cost of $689 per day, or $250,000 on an annualized basis.14 (Because the students’ length of stay varies in this type of setting, rates are often expressed as a daily, rather than annual or monthly, fee.) By contrast, the Atlantis Academy, a nonpublic day school in Miami, Florida, serves students with moderate learning disabilities at a per-pupil cost of $7,800 per year.15

Nonpublic schools specialize in just about every kind of disability. Because public schools often cannot accommodate children with severe disabilities, nonpublic schools tend to enroll some of the most demanding students. For example, students with serious emotional disturbance (SED) account for 40 percent of the students enrolled in nonpublic schools. About half the children suffering from a traumatic brain injury are placed in private settings. (See Table 3.)

Children with severe disabilities also tend to involve higher costs of education and care. Lower student-teacher ratios, greater use of support services such as physical and occupational therapy, counseling, and medical services, and the use of specialized equipment and facilities all make special education more expensive relative to regular education.

Nonpublic schools, when enrolling higher-needs students, may have the appearance of being a higher-cost provider relative to public schools, when in fact they may be competitive or even lower cost than the public schools for a given type of student. The full costs of nonpublic schools are easily identified whereas the costs of public services are often incompletely reported due to cross-subsidizing, excluded costs, and other reporting errors. Few studies exist comparing the total costs of nonpublic schools and public school placements for a given level of service.

A variety of funding arrangements for nonpublic schools exist depending on particular states’ funding formulas. (See Appendix I.) Funding for nonpublic-school placements may be fully reimbursed by the state or fully paid by the local school district (which receives additional revenues from the state and federal governments to defray the costs of special education). More often, however, costs are shared between local and state-level agencies. It is generally believed that when local agencies must pay a share of the placement costs, they will have a greater incentive to contain those costs.

Government agencies other than education, such as the departments of health, mental health, juvenile justice, and social services may pay part or all of the costs of nonpublic-school placements, especially if the student is also receiving residential care. The funding formula may divide costs on a percentage basis or by functional area of jurisdiction. For example, the local school district pays 30 percent of the costs of a nonpublic placement, with the state picking up the remainder. Or, a social services agency pays the residential portion and the school district of residency pays the education portion for a student.

Another source of funding is the federal government. IDEA provides roughly eight percent of the funds allocated to special education by all levels of government.19 Additional federal funding programs for special-needs students include Medicaid, Head Start, Title 1, and Aid to Families with Dependent Children. Many nonpublic schools (particularly those with nonprofit tax status) also depend on private donations, though this tends to be a small portion of their overall budget. Funds may also come from the private insurance of students’ families.

By law, parents or guardians may participate in designing their child’s Individualized Education Plan (IEP) which directs where a child will be placed. Parents do not have the unilateral authority to make placement decisions for their child if the placement is at public expense. Occasionally parents, however, have successfully litigated under IDEA to force the public-school district to pay for the placement they have chosen for their child.20