Why Special Education Costs Keep Climbing — and How Districts Stay Ahead
For most New Hampshire school boards, special education is no longer a line item that can be estimated and left alone until town meeting. It is the fastest-growing, least predictable part of the budget, and it is driven by federal law, not local preference. Understanding why costs move the way they do, and what strong administrative practice looks like, is the first step toward budgeting for it with confidence instead of dread.
The Numbers Behind the Pressure
The scale of the challenge is visible in the state’s own data. New Hampshire districts spent an estimated $978 million on special education services in the 2023-24 school year, and the state’s dedicated Special Education Aid program reimbursed only about $35.9 million of that, roughly 3.7 percent of the total (NH School Funding Fairness Project, 2025). Federal IDEA funds cover a further slice, but even combined, state and federal support leaves the large majority of the cost to local property taxpayers (NH School Funding Fairness Project, 2025).
The pressure is concentrated in a small number of very expensive cases. In the 2024-25 school year, 907 New Hampshire students required services costing more than $75,000 per pupil, and within that group, 98 students’ services exceeded $215,000 — more than ten times the average per-pupil cost (NH School Funding Fairness Project, 2025). Those are exactly the cases most likely to involve an out-of-district placement, and they are the ones a district cannot see coming a year in advance.
There has been real relief at the state level. Lawmakers increased the Special Education Aid appropriation enough that the program is now expected to reimburse about 90 percent of eligible costs, up from 66 percent the year before, and a new statutory floor requires the state to fund at least 80 percent of eligible expenses going forward regardless of appropriation levels (Concord Monitor, 2025). That is meaningful progress, but it does not eliminate the local share, and it does not make individual placement costs predictable from one year to the next.
Why Out-of-District Placements Are the Hardest Line to Plan
Out-of-district placements are difficult to budget for a simple reason: the obligation is not discretionary. Under the Individuals with Disabilities Education Act, a district must provide a free appropriate public education to every eligible student, and if a student’s needs cannot be met in-district, the district must fund an appropriate placement regardless of what it costs or what else is in the budget. A new placement can surface mid-year when a family moves in, when a student’s needs change, or when a due process finding requires a different setting. None of that lines up with the town meeting calendar.
This is different from almost every other cost a district manages. A facilities project can be phased. A staffing decision can be delayed a year. A special education placement obligation cannot be deferred because the budget is tight.
Federal IDEA funds and Medicaid reimbursement provide additional support beyond the state Special Education Aid program, but neither is designed to cover the full cost of an out-of-district placement, and both come with their own reporting requirements that a district must meet to receive the money. A board that only tracks the state aid line is not seeing the full funding picture.
What Strong District-Level Practice Looks Like
Districts that manage this well tend to share a few habits:
- Multi-year cost forecasting for known high-need students, updated at least twice a year, not just at budget season.
- A dedicated reserve or contingency line sized to the district’s actual placement history, not a token amount.
- Regular, structured coordination between the special education director and the business administrator, so a change in a student’s placement triggers a budget conversation immediately rather than surfacing at year-end.
- Contemporaneous documentation of qualifying costs, so the district captures every dollar of state Special Education Aid it is entitled to rather than under-claiming through incomplete paperwork.
- A standing line of communication with the school board so members see placement-driven cost trends as they develop, not only when there is an overrun to explain.
None of this makes special education costs smaller. What it does is turn a source of year-end surprise into a number the board has already seen coming.
What to Do Next
Boards and superintendents can start with three concrete questions:
- Ask your business administrator for a three-year trend line of special education costs, broken out between in-district services and out-of-district placements.
- Confirm the district is claiming every dollar of state Special Education Aid it qualifies for — under-documentation is one of the most common ways districts leave reimbursement on the table.
- Set a standing quarterly review between the special education director and the business office, rather than waiting for the annual budget cycle to surface changes.
Special education spending will keep growing as needs grow and as the cost of specialized services rises. Districts that treat it as an ongoing administrative discipline, not an annual budget guess, are the ones that keep the board’s confidence and the district’s finances aligned.