Recommendations to the Governor and Legislature re: Special
Education Excess Cost Accounting
Excess Cost Accounting Ad Hoc Committee
Mary Alice Heuschel (Renton)
Kris Lenke (Puyallup)
Fred Row (Renton)
Dennis Mathews (ESD 112)
Trip Goodall (Deer Park)
Doug Matson (W. Valley, Spokane)
Carol Gray (Vancouver)
Brian Aiken (Fife)
Sue Curtis (Anacortes)
John Molohon (ESD 113)
Christie Perkins (Coalition)
Mike Merlino (Evergreen, Clark)
Michelle Corker-Curry (Seattle)
Neil Sullivan (Spokane)
OSPI Staff
Jennifer Priddy, Doug Gill, Calvin Brodie, Mary Ellen Parrish, John Bresko, Michelle
Sabin, Kim Thompson
Mandate of Committee
The following operating budget language governs the mandate of committee to review
and recommend a Special Education Excess Cost Accounting method:
“…conduct further evaluation of issues raised in the recently completed joint legislative audit
and review committee report on the accounting of special education excess costs. Within the
amounts provided in the subsection, the office of the superintendent of public instruction will
convene a work group to evaluate modifying or replacing the current 1077 methodology. This
work group will deliver a report to the appropriate committees of the legislature, including the
joint legislative audit and review committee, and the office of financial management, by January
1, 2007. The work group will take into consideration recommendations of the Washington
learns steering committee.”
As background, the related JLARC recommendations follow:
JLARC Report Recommendation # 2
The Superintendent of Public Instruction, with the assistance of interested
stakeholders, should examine whether the current excess cost methodology might
be improved through various modifications to the 1077 Special Education Excess
Cost Worksheet.
JLARC Report Recommendation # 3
The Office of Superintendent of Public Instruction should provide clear guidance and
instruction, and periodic training on how to accurately and appropriately:
A. Complete the 1077 Least Restrictive Environment child counts through:
1. Better identification, in the individualized education programs, of the
location where minutes of specially designed instruction are provided; and
2. A consistent base of minutes of weekly instruction used for calculating
percentage of time students spend in the regular classroom.
B. Allocate costs of contracted services between basic education and special
education programs.
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JLARC Report Recommendation # 4
The Office of Superintendent of Public Instruction should require school districts to
report the full costs of serving their special education students (i.e., both basic
education and special education programs separately).
Committee Process
The committee met four times during November through January, reviewing the:
 JLARC report,
 Washington Learns K-12 Advisory Committee recommendations,
 Background information on the current 1077 process, and
 Strengths and weaknesses of the current 1077 method.
Further, the committee discussed new methods, the exact calculations of such
methods, and the advantages and pitfalls of such methods.
In mid-December the committee reached consensus on a proposed new excess cost
accounting method. This method and related background detail is described below.
Superintendent Bergeson accepted the committee’s recommendation in full.
Standards for an Improved Method
The committee identified several standards and requirements by which to evaluate a
recommended method:
 Transparency and Ease of Understanding
 Accuracy
 Equitable and Fair
 Incentive Neutral
In addition, the committee put a very high premium on an accounting method that would
reinforce the current state priority to treat every student as a basic education student
first. To this end, the committee focused on developing a method that easily identified
the amount of basic education revenue that was being expended on students’ specially
designed education or instruction.
COMMITTEE RECOMMENDED STATE SPECIAL EDUCATION EXCESS COST
ACCOUNTING METHOD
Description of Method
The proposed method has two objectives. First, to ensure that special education
eligible students, as a class, receive their full share of general apportionment (basic
education) funding before accessing the state excess cost funding. Second, to simplify
and consistently apply the cost accounting necessary to achieve the first objective by
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shifting the majority of the cost accounting function from the local school district to the
state apportionment office.
The proposed accounting method will:
a) Shift a portion of basic education revenue to the special education program
based on students’ full-time equivalency (FTE) in the special education setting;
and
b) Require all costs for the special education program (e.g., the full cost of special
education teachers and program) be captured within a single program rather than
splitting program costs between basic and special education.
The basic education revenue shifted to the special education program, revenue 3121, is
intended to establish a minimum amount of spending of state program 21 before the
school district accesses the excess revenues, revenue 4121, generated by the excess
cost formula (.9309 of general apportionment revenue).
The method is referred to as the Washington State Excess Cost Accounting Method
(WSECM).
Specifically:
1.
Districts would continue to use the 10771 to generate student FTEs served in the
special education setting. The number will be specific/unique for each school
district. (Currently of the approximate113,000 school-age students eligible for
specially designed instruction and generating general apportionment revenue,
~70% of full-time equivalent students are served in the regular education setting;
~30% of FTE students are served in the special education setting.)
2.
Based on the split of FTE described above, OSPI would split general
apportionment funds associated with these students eligible for special education
into three categories:
a. General apportionment for the regular education classroom (current
account code 3100);
b. General apportionment for the special education setting (new account
code 3121);
c. Indirect support for utilities, administration, district-wide services, etc.
3.
Districts will code their staff and appropriate expenses related to providing
specially designed instruction to the special education program.
4.
Districts will first expend the general apportionment funding associated with
revenue code 3121 and then expend excess cost funding attributed to revenue
code 4121.
The 1077 Form collects the school districts’ information of implementation of Least Restrictive
Environment (LRE) on December 1st each school year. Districts report the percentage of time that special
education students spend in the basic education classroom; it is a federal reporting requirement under
IDEA part B.
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Proposed Method measured against Standards for Improved Method
Transparency and Ease of  WSECM is easier to understand because OSPI will
Understanding
display and account for all revenues that districts are
allocated in general apportionment and special
education.
 Because districts will not split code staff, expenditures
for special education are contained in one set of codes
and easily identifiable on current OSPI reports.
Accuracy
 Revenue splits are calculated by OSPI for each school
district using current apportionment formulas and
reported student data.
Equitable and Fair
 All students in specially designed services will be
included in revenue calculations (tables 1-8 of 1077) to
the extent they generate general apportionment
funding.
 WSECM is responsive to districts’ unique mix of
students and continuum of service delivery settings.
 WSECM is consistently applied for all districts by the
OSPI.
 Special education students, as a class, receive a full
share of general apportionment revenues in addition to
excess cost revenues. Districts will first expend
general apportionment funding attributed to revenue
code 3121.
Incentive Neutral
 Method reflects, but does not influence, a district’s
LRE decisions.
 No additional revenue is generated by a district based
upon students’ placement on the 1077.
 Revenue split between programs is based on prior
year 1077 tables, removing any incentive related to
student placement in the special education setting.
 Use of the prior year’s 1077 data presents a stable
and consistent basic for district to use in budgeting
and accounting for the school year.
Other
 WSECM is consistent with the federal excess cost
threshold requirements that will govern how much
districts must spend in total resources before
accessing federal IDEA funds. OSPI will develop
future guidelines consistent with the federal excess
costs.
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JLARC Recommendations and Findings: Committee Response
JLARC
Committee Response
Recommendation 1: The Legislature should decide
whether the current or alternative approach should be
used.
We recommend that the
legislature adopt the
WSECM.
Recommendation 2: If the current method is
maintained, the OSPI should examine modifications to
improve the accuracy of the current 1077 worksheet.
Agree: Improving the 1077
accuracy remains relevant to
the new WSECM.
Recommendation 3: If the current method is
maintained, the OSPI should provide clear guidance
and instruction on how to a) complete the 1077 Least
Restrictive Environment child counts; and b) assign
costs of contracted services and non-employee related
costs between basic education and special education
programs.
Agree:
Recommendation 4: The OSPI should require school
districts to report the full cost of serving their special
education students.
Agree; WSECM will enable
such reporting.
JLARC Finding: Some districts have not implemented
the current excess cost accounting method.
Upon adoption, WSECM will
be consistently calculated by
OSPI for each district using
data already reported to the
state.
JLARC Finding: Some districts split code staff
incorrectly.
WSECM provides for full cost
special education accounting.
Accordingly spilt coding of
staff is no longer appropriate.
a) JLARC 1077
recommendation is relevant
to WSECM also.
b) Under the WSECM,
concerns about split coding of
contracted services and nonemployee related costs are
no longer relevant.
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JLARC
Committee Response
JLARC Finding: Some districts make mistakes in
Training by OSPI and ESDs
identifying and reporting Least Restrictive Environment will address identifying and
because:
reporting Least Restrictive
Environment.
a. IEPs do not clearly state where services are
provided.
b. Number of minutes in a location is not defined
on IEP.
c. Process for determining the number of minutes
on which to base table placement is unclear to
some districts.
Items a through c result in possible incentives and
disincentives for student placement.
JLARC Finding: Current method does not address
assignment of key costs:
a. NERCs.
b. Contracts.
Upon adoption of the new
WSECM, these costs would
be included in full. Concerns
about assignment of
contracted services and nonemployee related costs are
no longer relevant.
JLARC Finding: Total cost of serving special education Upon adoption of the
eligible students is not reported; total revenue is not
WSECM, OSPI will revise the
accounted for.
School District Accounting
Manual, and budget and
expenditure reports to track
total cost of serving and the
total revenue generated by
special education-eligible
students.
Use of the 1077 Form in the Proposed Method
The committee has carefully considered the findings and concerns that JLARC
expressed about the 1077 form report. However, the committee concluded that the LRE
was the best available statewide data for use in an excess cost accounting method.
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Additional Work Products Required by OSPI to Implement Method
1.
Revise apportionment reports for new revenue coding (1220 report and others).
2.
Define adjustments to the K-4 calculation to mitigate unintended consequences
of implementing a new method.
3.
Modify the carryover and expenditure rules related to special education excess
cost revenues for the WSECM.
4.
Develop a training module to ensure districts appropriately place students on
1077 tables. Address including students in LRE tables 4-8 in the WSECM
method.
5.
Review the School District Accounting Manual requirements for the special
education programs, consulting the OSPI School District Accounting Advisory
Committee and the Special Education Advisory Committee.
6.
Revise the current special education safety net process to accommodate the
WSECM.
7.
Reconvene its Excess Costs Accounting Ad Hoc Committee during school years
2007-08 and 2008-09 to review and evaluate school district implementation of
the WSECM and report to the legislature any potential changes or modifications
to the method.
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