The crowd out effect of special education

Economists talk about the crowd out effect most often in the context of private spending versus government spending. The theory is that, if the government spends more, then there’ll be less private-sector spending. Why? Assuming a constant supply of money, a greater slice of government spending means a smaller slice for the private sector.

Yet the crowd out effect isn’t limited to public versus private finance. It’s been examined in light of graduate school enrollment (does enrolling more international students crowd out native students?); the labor force (do overeducated workers crowd out jobs for low-skilled workers?); and even charitable donations (do government grants to nonprofits crowd out private donors?).

Crowding out can occur in K-12 education expenditures also, especially with respect to special education spending. Each additional dollar a district spends on special education may mean one less dollar for general education.

To examine at a glance whether special education is crowding out general education, I calculate the ratio of general education to special education spending for ten districts in Ohio. This ratio indicates how many general education dollars a district spends for every dollar of special education. I then compare the ratio of general education to special education for FY 2002 and FY 2011. A declining ratio provides evidence that special education may have crowded out general education, and vice-versa, an increasing ratio provides no evidence of crowd out.

The table below shows ten districts and their general education to special education spending ratio. The results indicate that, for eight of the ten districts, special education may have crowded out general education spending.

Consider Celina City school district, located in rural Mercer County in Northwest Ohio. In 2002, the district spent $4.60 on general education per $1.00 of special education; meanwhile, ten-years later, the district spent only $3.33 on general education per $1.00 of special education. This indicates that increased special education spending has reduced the money available for general education.

Cleveland Metropolitan, Columbia, Lima, Oakwood, Olentangy, and Trimble also have declining general education to special education ratios. But interestingly, two districts, Dayton City and Minford, had increasing ratios—data that indicate that special education has not crowded out general education in these districts.

Table 1: Districts spending less on general education relative special education. General education spending per $1 of special education spending, FY 2002 and FY 2011

Source: Ohio Auditor of State, Comprehensive Annual Financial Reports, FY 2002 and FY 2011 for selected districts. Note: Calculation based on Total Government Funds, as reported in the districts’ Statement of Revenues, Expenditures, and Changes in Fund Balances - Government Funds.

The preliminary analysis here (yes, it’s far from complete—there are over 600 traditional public districts in Ohio) provides an early indication that, for the majority of districts, special education spending has crowded out general education during the past decade. This means that district’s core science, math, and English classes are being crunched, while special education services are swelling. In other words, the resources for the regular student population are languishing relative special education—a policy issue that should concern educators, parents, and taxpayers.

The problem of special education crowd out begs for solutions. And for solutions, we’ve turned to Nathan Levenson, a former district superintendent, a Harvard MBA, and a nationally-recognized expert in special education, who has written an Ohio-specific and national analysis of how to improve the cost-effectiveness of special education (see more below). For every district wrestling with increased special education costs—and given the data, it’s probably quite a few districts—these reports are well worth the read.

More By Author

Related Articles