Texas is set to reduce federal funding for special education services by more than $607 million each year. Local school district officials warn that this decision will likely exacerbate the already strained budgets for students with disabilities.
The School Health and Related Services (SHARS) program plays a vital role for many school districts, providing essential funding for services like counseling, nursing, therapy, and transportation for Medicaid-eligible children. According to the Texas Education Agency, over 775,000 students in Texas receive special education services. While the exact number of those eligible for Medicaid is unclear, many children benefiting from SHARS come from low-income families.
In the past year, the Texas Health and Human Services Commission (HHSC), which oversees the program, implemented strict limits on the types of services for which school districts can seek federal reimbursement. These changes have led to the significant funding cut of $607 million, according to estimates from the health agency. School district officials and special education advocates express confusion over the lack of communication regarding the reasons behind these drastic changes.
“We’re seeing an increased number of students that need more individualized care,” said Katie Abbott, special education director for a coalition of six East Texas school districts. “And yet, what are we doing?”
In response to these concerns, Texas officials have pointed to federal requirements. A 2017 federal audit revealed that Texas had improperly billed for services not allowed under the SHARS program, resulting in a requirement to repay almost $19 million. The audit indicated the need for the state to comply with federal guidelines.
The HHSC attempted to contest the audit’s findings but was unsuccessful, the agency reported to The Texas Tribune. The recent changes are part of an effort to bring Texas into compliance, according to the commission. However, federal appeals officers stated that Texas provided “nothing at all” to dispute the findings of improper billing for unallowable services, and criticized the state for submitting evidence after the deadline.
Moreover, federal officials clarified that Texas is not mandated to make specific changes to the SHARS program. The Centers for Medicare & Medicaid Services emphasized that as long as states operate within “broad federal parameters,” they can make their own decisions about program management.
School district leaders argue that Texas has overreacted to the audit findings, failing to adhere to federal expectations that the program should be administered with minimal restrictions. Some school districts are formally appealing the funding cuts, while others, particularly rural districts, have opted to withdraw from the SHARS program due to the administrative burden created by the recent changes. Those that remain are hopeful that lawmakers will address the financial gaps left in special education services during the next legislative session.
“We’re talking about our most vulnerable kids,” said Karlyn Keller, division director of Student Solutions and School Medicaid Services for the Texas Association of School Boards. “We can’t afford to continue to make these huge clawbacks in funding when we’ve got kids that need the service.”
Rising Deficits
With the cuts to SHARS funding, the Texas Education Agency projects that the gap between school districts’ special education expenses and revenue from federal and state funding will swell to approximately $1.7 billion annually.
In the Shiner school district, nearly 10% of its 700 students receive special education services. Due to the changes to SHARS, the district anticipates losing more than $79,000. Superintendent Alex Remschel warns that this loss will hinder the district’s ability to recruit and retain staff necessary for providing individualized care. Currently, the district employs three special education teachers and about six aides, sharing resources with eight neighboring districts. Remschel noted that they had to use their fund balance this year to cover the gaps caused by SHARS reductions.
“When I look at the dollars that we have, I see faces of kids,” Remschel said. “I don’t think that the people making these decisions see how kids are impacted, and that tears at my heart the most.”
Jason Appelt, executive director of the special education cooperative that includes Shiner, questions Texas’ decision to forgo federal funding. The cooperative serves around 900 students across nine rural districts, and previously received about $1 million in SHARS funding, which has now been cut in half. This revenue represented nearly 20% of the cooperative’s budget.
“We didn’t have any way to plan for this,” Appelt said. “Our districts are very fiscally conservative. If something doesn’t change, it’s going to be really tough on all these districts because there aren’t many places left to cut.”
Larger districts are also feeling the impact of the SHARS program changes. In the Katy school district, where about 18% of the 96,000 students receive special education services, the district faces an $8 million cut, according to estimates.
Gwen Coffey, assistant superintendent for special education, expressed concern about the increased documentation required by the health commission, making it more difficult for staff already overwhelmed with workloads. She noted that the agency seems unaware of what it is asking school districts to do.
On Oct. 1, for instance, the state health agency altered how districts bill for personal care services, which includes assistance with bathing, dressing, and feeding. Districts interpret this change as requiring detailed documentation of every instance of assistance provided to students, a demand deemed unfeasible given the need for instructors to assist multiple children simultaneously.
“I think the bigger question we all have is, why? What’s the purpose?” Coffey asked. “If the goal of the Health and Human Services Commission is to ensure timely and efficient delivery of services to students who need them, how does this achieve that?”
Addressing Cultural Issues
Kami Finger, assistant superintendent for school support and special services at the Lubbock school district, described the ongoing cuts as indicative of a “cultural issue” in Texas. She believes the state health agency is reacting with fear to the federal audit instead of seeking to maximize available reimbursement dollars.
“We’re too fearful that we’re not going to do it the right way to begin with,” Finger said, noting that her district is losing over $5.4 million due to funding cuts. “All of this is creating a precarious situation for district administrators in deciding which programs and services may need to be strategically abandoned.”
The federal audit, conducted from October 2010 through September 2011, primarily examined the Austin and Dallas school districts. It found that Texas had not consistently followed its own policies to ensure accurate billing for direct medical services. A ruling last October confirmed that Texas had numerous opportunities to present evidence against the audit’s findings but failed to do so within the required time frame.
“Therefore, the Board will not reconsider its decision on an issue that could have been raised earlier,” the ruling stated.
MSB School Services, a consulting vendor supporting many districts in the Texas SHARS program, acknowledges the issues identified in the audit. However, CEO Tabbatha Callaway has not seen documentation proving that Texas needed to implement such drastic funding cuts. She believes the health commission has complicated the program unnecessarily and that school districts possess the documentation that could assist the state in responding to the audit.
“We’ve tried to engage with them to understand the issues, but we haven’t been able to gain traction,” Callaway said. “There are solutions to recover these dollars that need to be explored.”
The state health agency stated it is working with education officials to ensure districts are informed about SHARS and conducts annual training to promote awareness. The agency has also created a Medicaid resource and training team to assist SHARS districts.
Despite the significant changes already in effect, many school district officials are reconsidering their participation in the program. Some rural districts that did not receive substantial SHARS funding are opting out entirely. Keller from the Texas Association of School Boards noted that if districts depend on these programs for funding and they vanish, they face dire consequences.
“If you’re counting on these programs to help you fund and then they go away, you’re left in very dire straits,” Keller said. “They’re deciding it’s better to figure it out with known funding than risk being caught short.”
Hope for Legislative Change
School districts and special education advocates remain hopeful that the Legislature will increase funding for special education services. They are advocating for a funding model based on individual student needs instead of time spent in special education settings. This approach could help districts cover essential personal care services.
However, public school funding increases have been scarce recently, particularly as these funds have been tied up in Governor Greg Abbott’s unsuccessful school voucher program, which would allow parents to use taxpayer dollars for private school tuition.
Texas has a troubled history with federally mandated special education services, having faced a $33 million fine for cutting funding in violation of the Individuals with Disabilities Education Act. Federal officials later determined that Texas had not made sufficient efforts to improve its special education system.
Despite the challenging political landscape and the state’s history, advocates remain optimistic.
“I believe special education funding is one of the few areas in education policy that garners broad agreement among legislators,” said Andrea Chevalier, director of Governmental Relations for the Texas Council of Administrators of Special Education.
Rep. Mary González, the Democratic vice chair of the House budget committee, stated she is working with colleagues to determine whether the state is “over-course correcting” in ways that further harm funding for school districts. She is also pushing for greater communication and transparency to ensure districts do not miss out on funds while appealing the state’s funding cuts.
Katie Abbott, special education director for a coalition of six rural East Texas school districts, emphasized the importance of ongoing services despite the funding challenges. “We’re passionate about what we do for kids, so I don’t see services stopping,” Abbott said. “It’s just squeezing blood out of a turnip to figure out how to make that happen.”
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