Federal Funding for IDEA: How Is IDEA Funded?

The purpose of the Individuals with Disabilities Education Act (IDEA) is to authorize formula grants to states (and also discretionary grants to eligible applicants, such as state educational agencies, institutions of higher education, and other nonprofit organizations) in order to educate children with disabilities, improve results for such children, and ensure equal protection of the law. The law recognizes that “a more equitable allocation of resources is essential for the federal government to meet its responsibility to provide an equal educational opportunity for all individuals.”

When the Education for All Handicapped Children Act (the Precursor to IDEA) was first passed, Congress’s intention was eventually for the federal government to provide 40% of the average cost of public education toward the mandated cost. The federal government has never succeeded in this goal: at most, they have only provided 18%. In this article, we break down the basics of IDEA funding.

IDEA provides three main types of funding called formula grants to states to support children with disabilities:

Two Part B Grants (ages 6–21)

These help states give children with disabilities a free, appropriate public education (FAPE) in the least restrictive environment (LRE). They are divided into grants to states (Section 611) for children with disabilities ages 3 through 21, and preschool grants (Section 619) specifically for children with disabilities ages 3 through 5. For both the Section 611 and Section 619 programs, the amount of money each state gets is based on:

• How much the state got in the past (from 1999 for Section 611, and 1997 for Section 619)
• The number of children with disabilities in that age group in the state (85%)
• How many of those children are living in poverty (15%)

Part C Grants (birth–age 2)

These provide early intervention services for infants and toddlers with disabilities from birth to age 2 and support for their families. Part C Grants for Infants and Families are for early help before preschool.

Part D Grants

These are discretionary grants to eligible applicants, such as state educational agencies, institutions of higher education, and other nonprofit organizations providing “national activities” that assist schools in implementing IDEA.

Part B and Part C grants are given to the main education agency in each state, called the State Educational Authority (SEA). For example, in California, Part B funds go to the California Department of Education (CDE), where Part C funds are shared between the Department of Developmental Services (DDS) and the CDE, which is the lead agency. In other states like Illinois and Idaho, the SEA is the State Board of Education (SBE). You can find out who the SEA is in your state using this table.

Most states then pass these funds on to local school districts based on a federal formula. But there are exceptions. Hawaii, for example, sends funding directly to schools since it operates as one big school district. In California, special education funds go through regional groups called Special Education Local Plan Areas (SELPAs).

Part D grants are allocated directly from the US Department of Education to a variety of academic and non-profit organizations, many covering multi-state regions or serving schools nationally.

Yes, each state has a unique way of distributing state funds to local schools and school districts.

• A few states, like California, allocate funding by Average Daily Attendance (ADA) of all students, without taking account of the number of children with disabilities.
• Many states distribute funds based on the number of students with IEPs, with specific rates for different eligibility categories.
• Other states reimburse local school districts for their IEP costs using complicated formulas.
• Many states fund special education based on the resources employed, such as the number of educational specialists (special education teachers), aides, and therapists.

In every state, these restricted state and federal special education funds are insufficient to cover the cost of special education. Most of the cost of IEP services (around 60%) comes out of the school district’s general fund. This is often termed “local funding” and, in many states, consists of property tax receipts. In some states like California, much of this general fund also comes from the state in an allocation called Local Control Funding Formula.

In 2020, a study looked at 5,694 school districts across 24 states to understand how much special education really costs. They found that, on average, the cumulative cost of special education of $38.8 billion costs about $13,127 per student with an IEP. Out of that:

• Districts received $10 billion in restricted special education state revenue ($3,388 per pupil).
• Districts received $4.6 billion in restricted federal revenue ($1,578 per pupil).
• That means local school districts still have to cover the rest through their “general” or “local” funding — roughly $8,160 per student.

Even though the federal funding only covers around 12% of the total special education costs, it’s a crucial piece of the puzzle. Without that federal support, schools would find it much harder to pay for the extra services and supports that students with IEPs need.

In 1972, two important court cases — Parc vs Pennsylvania and Mills v. Board of Education — ruled that states have a constitutional duty to provide public education to students with disabilities. To help states meet this obligation, the Individuals with Disabilities Education Act (IDEA) was created. IDEA sets up a process to decide what counts as a free and appropriate public education (FAPE) for each child with a disability. It also ensures parents can be involved in these decisions and have the right to appeal if they disagree.

Because education is mostly controlled by states, Congress doesn’t have direct authority over it. Instead, Congress encourages states to follow IDEA by providing federal funding grants. If a state didn’t comply, it could lose this funding — though that has never happened. Even without IDEA, states are still required by their own laws to provide equal educational opportunities for students with disabilities.

When state and local administrators say the federal government isn’t doing enough to fund IDEA, it’s fair to wonder: would they not fund it if the federal government withdrew their contribution? Does the state really disagree with Congress that students with disabilities have an equal right to public education? And does the school board really think our kids aren't worth the local investment to make that possible?