State Funding for Special Education in Oregon : Calculating Cost Differentials of special education for handicapped students in Oregon school districts

Abstract

A general principle of school finance is that the cost of the educational program is influenced by varying characteristics of students and school districts. This raises the question of whether state allocation policies should reflect the additional costs associated with particular educational programs, such as special education for handicapped students, vocational, compensatory, bilingual education, and gifted and talented education programs as well as cost differences associated with size, salaries, and related issues. Thus, it is essential for state government to identify cost differentials for special education programs in terms of various school districts to determine the importance of such differences and the possibility of adjusting formulas to reflect these differences. Higher levels of government intervene for special education in terms of social justice and social stability. The state of Oregon has a special interest, due in part to Measure 5, in identifying methods for allocating funds to support special education. There are several approaches to estimate cost differences due to special education, such as the resource-cost model and the resource-input methodology. Among the various methods for calculating the additional costs of special education, a cost function method has the potential to adjust for educational outcomes. However, estimating a cost function presents substantial empirical problems. In this study I estimate the additional cost of special education for handicapped students among Oregon school districts using a cost function method. In this process, by controlling for certain variables in a cost function, estimates of how locally specific characteristics, such as economies of scale, affect costs are investigated as well. The empirical results based on the 128 school districts show that there is no statistically significant evidence of a relationship between educational outcome and educational costs. The results are more consistent with an interpretation that schools spend the money available than they are with an interpretation that expenditures create well-defined impacts on measures of school performance. It implies it is very difficult, if not impossible, to apply a cost function method to determine appropriate state aid levels