As Virginia routes more students with disabilities to private schools, costs are soaring

Virginia places more students with disabilities outside their local public schools than 37 other states — a trend that’s dramatically increased spending on specialized private schools over the past decade.

The nonresidential programs — more commonly known as private day schools — have been a source of frustration for lawmakers over the past several years as more and more state spending has gone toward the cost-intensive model. Costs have more than doubled from fiscal 2010 to fiscal 2019, soaring from $81 million to $186 million.

It’s led to numerous efforts within the state’s General Assembly, including an unsuccessful bill in the 2020 legislative session that would have directed the Virginia Department of Education to launch a pilot program aimed at transitioning some private day students back to public schools. The past two budget cycles have also included funding for studies to examine private day tuition rates.

The continuing scrutiny prompted lawmakers on the Joint Legislative Audit & Review Commission to order a study of the programs, which are ostensibly geared toward students with more severe behavioral or learning disabilities that prevent them from being served by their local public schools.

But the JLARC study, presented on Tuesday, found that Virginia’s funding policies don’t encourage public schools to develop their own capacity to serve higher-need students. At the same time, the reported number of children with more severe disabilities has increased — leading to growing enrollment at private day schools and soaring state costs, which more than doubled between 2010 and 2019.

“Compared to other states and its federal goal, Virginia places a lot of children in out-of-school placements, which is primarily made up of students in private day school” said Stefanie Papps, a senior legislative analyst for JLARC. “According to the special education directors we interviewed, [teams] are sometimes forced to place a child in private day school because their district lacks the resources or the capacity to serve the child in the public school setting.”

Understanding how and why Virginia devotes state spending to specialized private schools requires some background knowledge on its Children’s Services Act program, first created in 1992 as a way to merge and streamline multiple state agencies that provide services to at-risk children — including those in foster care and those with disabilities. 

Under the program, which has its own dedicated funding in the state budget, children are separated into “mandated” and “non-mandated” categories depending on their level of need. The “mandated group” includes children in foster care, children at risk of being placed in foster care and children whose individualized education program, or IEP — a document developed by public schools for students with disabilities — calls for placement at a private day school.

Children’s Services Act funding is considered “sum-sufficient” for children in the mandated category, which means that both the state and local governments — which provide varying degrees of matching funds for the program — are required to cover approved services even if the cost goes above what they budgeted. And tuition for private day schools in Virginia comes from CSA funding, even though program administrators have no oversight or authority to approve or deny a student’s placement there.

The lack of CSA control has led to frustration among local program coordinators, according to the report, which noted that “county boards of supervisors and city councils frequently hold the CSA program responsible for the financial implications of private day school placements, but the CSA program does not make the placement decision and cannot legally change it.”

An even bigger issue is a wrinkle in state law that prohibits CSA dollars from going to special education programs in public schools. Until 2010, local divisions sometimes used the funding for services aimed at transitioning students from private day programs back to public school, including transportation or one-on-one classroom aides. But in 2010 and 2011, VDOE issued two memos clarifying that CSA funds couldn’t go toward any service within public education.

“Once that prohibition went into effect is when you started to see a notable increase in enrollment in private day special education schools,” said Bill Elwood, executive director of the Virginia Association of Independent Specialized Education Facilities. Instead of drawing from CSA funds, public school divisions rely on local support combined with state and federal special education dollars, which have been gradually decreasing over the past several years. In most localities, it’s also local governments — not school divisions themselves — that pay the match rate for private day school tuition.

As a result, districts have plenty of motivation to place students out of school and little impetus to develop their own services for children with more intensive disabilities. JLARC found that students are placed in private day schools at younger ages than they were 10 years ago, increasing the average length of stay — and the cost.

“Even if a school division can serve a student in an alternative in-house program for less than the cost of a private day school, localities do not save money because the state provides less funding for special education than it does for private day school placements,” the report reads. Under expectations set by the U.S. Department of Education, Virginia should be placing 2.5 percent of students or fewer in out-of-school placements. Currently, the state’s rate is almost double that.

Beyond budget concerns, there’s a question of whether private day schools are always the best choice for students in Virginia. According to JLARC, out-of-school placements are considered much more restrictive for children with disabilities because it prevents them from interacting with “non-disabled peers.” Sen. Janet Howell, D-Fairfax, asked Tuesday whether the state’s high placement rates — and CSA funding limitations — could potentially violate a federal law that requires students to be placed in their “regular educational environment” unless it’s vital for their academic progress.

Data suggests some students may be placed in private day schools even when it’s not truly necessary. Between fiscal 2017 and 2019, JLARC found that 10 percent of students — 350 total — did not have any moderate or severe needs ratings on three core sections of a state assessment tool for children in the CSA program.

And while the agency found that the schools are largely effective for students, there are also broader questions of transparency within the industry. JLARC analysts found that tuition increases accounted for 25 percent of the state’s rising spending on the programs. But the report also concluded that it’s often difficult to compare fees throughout the state. 

While 19 programs operated at a loss and 19 others reported yearly profit margins between zero and 10 percent — on par with other private schools across the country — 23 schools reported profit margins between 11 to 15 percent. Another four said they made 16 percent or more a year. And the exact cost of tuition ranges widely across Virginia, from $22,000 a year at some schools to $97,000 a year at others.

Papps, the legislative analyst, said tuition rates at private day schools “are generally reflective of what it costs to deliver intensive services.” But while the state’s Office of Children’s Services — the administrative arm of the CSA — keeps an online directory of private day school providers and fees, it doesn’t validate the information that’s submitted. A previous effort to study tuition rates was delayed, and largely stymied, by schools’ refusal to cooperate.

“When the study was released, it did not contain enough information to implement a rate setting process because too few private day schools had submitted information,” the agency said of the 2019 report.

Beyond the opaque rate-setting, JLARC found that at least 12 students in 2019 were enrolled in private day schools that weren’t licensed by the Virginia Department of Education. More than a third of the state’s programs haven’t been accredited by any third-party oversight agency. 

Performance data on private day schools for the 2020-21 school year, set to be published by VDOE for the first time, will also be much less comprehensive than the information provided for public schools. The first-ever report will consist of four performance measures, including parent satisfaction, student progress relative to the goals in their IEPs and the percentage of students who return to public school. But it won’t include teacher quality, school accreditation status or data on career and technical education — all components that are reported yearly for Virginia public schools.

The reports also won’t include information on incidents of restraint and seclusion — controversial disciplinary techniques that some parents feel have already been misused in local public schools. JLARC noted that state regulations for the measures are more “comprehensive and detailed” for public schools than they are for private day programs.

Whether lawmakers take action to reform private day school placements in 2021 — an abbreviated session that the state House of Delegates plans to hold virtually — is still unclear. Del. Joseph McNamara, R-Roanoke, has refiled his bill for a pilot program aimed at transitioning some students back to public school. And JLARC issued 18 recommendations for the CSA program, including amending state law to allow CSA dollars to go toward special education services in public schools.

Another potential change is transferring funding for private day school tuitions to the Virginia Education Department, an agency that, while more directly involved in placements, has had its own problems with special education oversight.

Elwood said private day providers do have questions about some of the proposals, “mainly just because of the scope of what is being contemplated,” he said in a Wednesday email. While many would support the use of CSA dollars for transitional services, he said there could be issues if a significant portion of the funding was redirected toward public school services that tried to replicate the private day model — one that supports small class sizes, high staff-to-student ratios, and children with more severe learning or behavioral disabilities.

“That would be concerning, not to mention much more costly to the state,” Elwood said. There are also concerns that the General Assembly might remove the sum-sufficiency requirements of the program, which he said could prevent students from receiving recommended services if they were deemed too costly.

“It is vitally important that all stakeholders, especially those who provide the services, be part of the planning, conceptualization and implementation of this all along the way,” he said. “There is just too much at stake for the future of the program and for the lives of these children and their families.”