Roughly 5.37 million children with disabilities under the age of 22 receive special education services in the United States.2 The U. S. Department of Education no longer collects information about the total cost of special education, but the Center for Special Education Finance estimates that in 1993-94, public expenditures for special education exceeded $32 billion.3 In 1987-88, the most recent year in which comprehensive data was collected by the Education Department, public spending on special education totaled $19 billion from federal, state, and local sources.4

By far the most common disabilities are learning disabilities5 (see Table 2). The proportion of learning disabled students more than doubled between 1976 and 1994, from 23.8 percent to 51.1 percent of all disabled students.6 Special education policies and their funding mechanisms vary from state to state. As a result, the percentage of all school-aged children identified as having a disability ranges from a low of 7 percent in Hawaii to a high of 15 percent in Massachusetts.7

When Congress passed the landmark Education of All Handicapped Children Act (P. L. 94-142) in 1975, it set in motion a legislative mandate that would fundamentally alter the way students with disabilities are served in the public schools. The act, later renamed the Individuals with Disabilities Education Act (IDEA), provides federal funds to states for the purpose of educating students with disabilities. In order to receive such funds, IDEA requires that states adopt specified policies and procedures for special education. IDEA mandates that every child with a disability be provided with a free appropriate public education— regardless of cost. Because the term "free appropriate public education" (FAPE) has never been well defined, parents and educators often disagree over how a child is to be educated, which can lead to intense litigation.

The cost of a special education, in the public or private sector, is considerably higher than regular education. A Reason Foundation study of the Los Angeles Unified School District found that the average per-pupil cost of special-education is two-and-one-half times greater than the cost of general education.9 In extreme cases, the public’s cost of educating a single student, including such support services as residential care and out-of-state transportation, can approach $80,000 annually.

IDEA requires that schools provide a continuum of placement options, including various placement settings within the public schools, and placement in nonpublic schools. Because of the law’s emphasis on placing children in the least restrictive environment, public-school officials first attempt to place a child in the public schools, even when the student may spend little or no time in the regular classroom. (Note: The least restrictive environment policy assumes that students with disabilities are best served in placements which integrate them with their non-disabled peers, which is not necessarily true for every student.) Only after failing to place or serve the student in the public schools will public officials consider placement in a nonpublic school.

Sector Snapshot

The use of private providers is well established in special education and includes both for-profit and nonprofit schools and services. Federal law dates a continuum of service options at public expense for students with disabilities, creating steady demand for the services of contract providers. The special-education sector is characterized by local providers specializing in particular disabilities, serving niche markets. In addition to operating schools, the private sector also provides services such as student assessment, counseling and therapy, residential treatment, and transportation to students with disabilities. The U. S. Department of Education reports that just over two percent of the nation’s special-education population, or 100,700 students, attend nonpublic schools.

Number of private special-education schools: 3,000

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