Special education funding can be a significant financial cost for school districts in New Hampshire, particularly as the number of children eligible to receive special education services increases. State policy provides additional financial support for school districts and certain students to help meet educational needs of students with disabilities or other specific or specialized needs.

This State policy support comes in three primary forms: Special Education Differentiated Aid, Special Education Aid, and aid to students who require episodes of treatment.

The Governor’s budget proposes a 47.2 percent increase in Special Education Aid, and defines a funding source for episodes of treatment aid. The House Finance Committee, currently considering the Governor’s budget proposal, has much lower revenue projections than the Governor incorporated into her State Budget.

This blog explains the primary ways special education is funded by State dollars, excluding federal pass-through funds, in the New Hampshire State Budget.

Special Education Differentiated Aid

The method that moves the largest number of resources related to special education is Special Education Differentiated Aid, which is embedded in the State’s education funding formula. In the education funding formula, school districts, public charter schools, or Education Freedom Account students receive a base amount of aid of $4,182 in State Fiscal Year (SFY) 2025 per pupil enrolled, but have additional aid for certain characteristics of the pupil.

This additional aid is based on the number of students who have an Individualized Educational Plan (IEP). For each student with an IEP, the education funding formula distributed an additional $2,100 in SFY 2024 and $2,142 in SFY 2025. These dollars specifically do not necessarily have to fund special education services, but may help offset the higher costs school districts might incur to provide an education to these students.

These dollars are not budgeted separately in the State Budget, but are wrapped into the overall Adequate Education Aid appropriation. However, the State has reported the amount paid in SFY 2024, and what it expects to pay in SFY 2025, for this form of differentiated aid. For SFY 2024, the State paid $65.0 million in Special Education Differentiated Aid to school districts, and expected to pay another $67.4 million in SFY 2025. In total, this form of aid would be $132.4 million to school districts provided by the State based enrollment of students with IEPs during the SFYs 2024-2025 State Budget biennium.

For public charter schools, the State provided nearly $1.8 million in Special Education Differentiated Aid during SFY 2024, the most recent year with available data. An additional $1.5 million in Special Education Differentiated Aid for Education Freedom Accounts was granted in SFYs 2024 and 2025 combined. These appropriations are embedded in the individual budget lines for public charter schools and Education Freedom Accounts.

The Governor’s budget proposal did not include any provisions that would alter these components of the education funding formula, although more students would be eligible for Education Freedom Accounts under the Governor’s proposal.

Special Education Aid

A separate budget line from Adequate Education Aid, Special Education Aid is specifically targeted to schools based on students who have significantly higher-than-average costs for their educational needs.

As described in State law, this aid applies to instances in which expenditures for a student receiving special education services exceed 3.5 times the estimated State average per pupil cost, based on the preceding school year. The school district is responsible for all costs below 3.5 times the average amount, but the State would pay for 80 percent of the costs between 3.5 times and 10 times the state average per pupil expenditure.

If the cost rises above 10 times the amount, the State would cover the entire expenditure beyond that higher threshold. Students with significant needs may be receiving services outside of the school building itself, although the school district may pay for those services and make them eligible for reimbursement from the State.

If the appropriation in the State Budget is insufficient to cover the eligible costs of reimbursement requests from all school districts as determined by this formula, the total amount paid is prorated for each district. For example, in SFY 2025, the State appropriated $33.9 million for Special Education Aid, which was 68.8 percent of the amount of the $49.3 million in eligible costs school districts reported for reimbursement. As a result, school districts were each allocated 68.8 percent of their total eligible amounts.

The current State Budget appropriated the same amount of $33.9 million in this form of Special Education Aid in SFY 2024 as in SFY 2025, for a total of $67.8 million in the current State Budget.

The Governor’s budget proposal includes an appropriation of an additional $32.0 million toward Special Education Aid, for a total of $99.8 million over the biennium and a total increase of 47.2 percent relative to the current State Budget.

Episode of Treatment Aid

The third form of appropriation is a recent expansion of the role of State aid for specific situations related to special education needs that require “episodes of treatment,” which was first established as part of the current State Budget.

The 2023 State law defines an “episode of treatment” for children as “when a child needs to be placed by the Department of Health and Human Services (DHHS) in a DHHS-contracted and/or certified program to receive more intensive treatment and supports and has the objective of helping children in crisis avoid or reduce the use of psychiatric hospitals or emergency rooms.”

Under the 2023 law, the State fully covers special education costs related to an episode of treatment and the determination of placements by the New Hampshire DHHS. The State made an appropriation of $9.2 million in total for the current State Budget to support this obligation, and any unused funds will roll forward into the next State Budget under current policy.

Under the Governor’s budget proposal, funding for expenses related to episodes of treatment would be specifically drawn from the Education Trust Fund.

The Next State Budget

Funding for special education in the next State Budget could face several key challenges. State revenues are projected to be behind target amounts, and State policymakers have fewer flexible federal resources available than they have for the last two budget cycles. School districts, however, have received prorated amounts of Special Education Aid relative to the amounts they are eligible for in all but two fiscal years since SFY 2009. Costs were substantially higher, $15.4 million (45.4 percent), than budgeted amounts in SFY 2025. If State funding for special education aid is reduced by legislators facing a challenging revenue environment, higher local costs will likely increase upward pressure on property taxes to fund education needs for Granite State students.