Special Education Organizations are going through significant challenges, spanning many different aspects programmatic, compliance, and fiscal areas, which we will be talking about over the next hour and a half … none more significant, in my opinion, then the declines providers are experiencing with respect to enrollment … especially in the 4410 area.
Over the last few years, we have seen a significant decline in half-day services, with many providers closing their half-day classrooms due to low enrollment. We are now seeing some of the same issues in some of the less intense classrooms (those with 12 and 10 students). This was a direction that the sector was already moving in, but unfortunately, the COVID pandemic has sped up the process. There are several factors that are contributing to the enrollment issues:
- The COVID pandemic has resulted in many more people working from home, which has dramatically decreased the number of children in daycare, resulting in children not being evaluated in a timely manner. The number of children receiving EI services during the second quarter of 2020 was down in excess of 30%, which meant a reduction of children transitioning into pre-school programs. This trend has carried over to 2021, albeit at lower levels.
- Many CPSE’s are still working remotely, which is resulting in a slow-down in placements and there has also been a significant decline in the number of SEIT services that are being recommended for children.
- With the major push for the expansion of Pre-K for all to 3 and 4 year-olds, many districts have expanded their UPK programs and integrated pre-school special education into their programs. This is more attractive to districts as they get paid both for the UPK and the special education component, and if you remember, about two years age, SED made it very easy for districts to enter the 4410 market place (no application process). The districts are able to handle the higher functioning children (those who do not have high related service needs or intense behavioral issues) that typically would have found their way into 12:1:2 or 10:1:2 classrooms.
As a result, many programs that have higher ratio classrooms are finding that enrollment is down and it is taking longer to fill these classrooms. This creates a challenge and decision for these providers to determine if they want to wait to see how things shake out over the next year or so (will the number of evaluated children increase or is this the new normal), or if they should start looking to change classroom ratios to more intense ratios. Of course, there are numerous problems with that strategy:
- SED does not willingly flip SCIS classes into SC classes. In fact, many programs have had a difficult time converting half day classes to full-day classes, even though the number of ½ day children is a fraction of what it was a few short years ago. The issue is that with districts holding on to the less intense children that would typically have wound up in SCIS classrooms, for many programs, converting some of their SCIS classes to SC will be critical.
- If SED does approve a change in classroom ratio from a less intense to a more intense classroom, SED has traditionally worked with programs (at some level) to accommodate the increase in direct care costs, but they have been reticent to include additional funding for non-direct costs, including occupancy costs. It may be very difficult for programs to reconfigure classroom space to create more efficiency with smaller classroom models, so it will be important to get SED program and RSU buy-in, because without the increase in rates for non-direct care costs, programs may find themselves severely underfunded.
- The UPK expansion into district programs has dramatically limited providers ability to attract non-disabled children for their SCIS classes. There is talk that UPK and 4410 will be more closely integrated … we shall see how that shakes out.
- SCIS classrooms are taking on a more extreme disparity between disabled and non-disabled children, as programs take on children with more intense children in an effort to fill classrooms. As a result, no longer is there a range of abilities that blend nicely into the SCIS model. This has been and will continue to be an unintended consequence of district’s “cherry picking” children with IEP’s that fit the profile of IEP children that each district determines they can handle.
Enrollment concerns are obviously significant, because the decrease the amount of overall funding a provider has coming in to spend. For many providers, non-direct costs tend to be more fixed in nature, so necessary cuts attributable to enrollment slow-downs tend to be more focused around direct costs, which could result in non-direct care screen issues. Furthermore, reductions in enrollment also means a reduction in IDEA funding, which for many providers is no longer supplemental, but instead a way to cover incidental costs (such as admin staff) that there is just not room for in the rates.
There are potential solutions that SED and DOB can implement to help with some of these concerns:
- Develop an expedited process to modify classroom models/ratios based upon specific district needs that would make it easier for programs to change their ratios.
- Build more flexibility into the approval letter to cover a range of classroom models instead of a single model, so that ratio modification waivers would not be necessary and student needs can be more easily met.
- Strip certain occupancy costs out of the admin screen so that fluctuations in classroom ratios will not have as significant an impact on non-direct care cost screens.
And I am sure there are many other solutions available. The issue is that it is unlikely that DOB will approve a model that it believes will put more money into the 4410 program than is already being allocated.
Unfortunately, I only see these trends continuing, with special education providers principally handling the students with more severe disabilities and intense needs and lower classroom ratios.
Only time will tell if enrollment will increase once the pandemic is over … let’s hope it does.
Kenneth R. Cerini, CPA, CFP, FABFA
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.