As Mayor Eric Adams’ administration sets records on special education spending, new legal filings shed light on alleged “fraud” that city and state officials say is driving up costs.
The suspected schemes emerged through a lawsuit brought by a prominent Hasidic organization over how private schools are reimbursed for special education services such as specialized instruction, speech therapy and occupational therapy. All but one of the 20 cases cited by the state education department as raising “fraud concerns” involved students attending yeshivas.
The New York Times reported in 2022 that providers working with students at Hasidic schools were driving a dramatic increase in special education spending in the city. The new cases, introduced as evidence by the state education department in Albany Supreme Court last month, show that the trend persists in the dizzyingly complex world of taxpayer-funded special education services for private schools students.
Court filings show that there were 7,600 such claims for reimbursement of special education services at private schools in the 2018-19 school year. There were nearly 20,000 such claims in the 2022-23 school year.
Both the city and state say some special education providers are taking advantage of the system by seeking reimbursement for services that are either unnecessary or not provided at all.
To bolster their argument for reform, state education department lawyers cited recent decisions by hearing officers evaluating special education claims from parents and providers.
The decisions show a special education provider seeking reimbursement for lessons to four students on reading comprehension, math and other subjects at a rate of $580 an hour. A hearing officer wrote that amount was “excessive and unreasonable” and awarded a rate of $290 an hour. Another decision cited by the state involved a poorly doctored contract for occupational therapy, one on one counseling and other services. In others, hearing officers wrote that parents appeared unaware that special education providers were seeking reimbursement on their behalf.
The city education department’s general counsel Liz Vladeck said that the dramatic spike in reimbursement requests for special education services at private schools has exacerbated a case backlog that delays payments to kids with disabilities.
“These cases have overwhelmed our system,” Vladeck said. “There are pretty serious fraud indicators in many of these cases.”
Agudath Israel of America, an Orthodox Jewish advocacy organization leading the legal fight against changes to the system, said the city bears responsibility for its dysfunction. The group pushed back against the notion that the Hasidic community was driving an increase in claims for reimbursement for special education services.
“Of course, Agudath Israel never condones fraud,” said Avrohom Weinstock, chief of staff at Agudath Israel. “But pointing to individual cases of alleged fraud, or instances of charging more than the city would like, which we cannot speak to, does not get [New York City] or [New York State] off the hook.”
‘Outright fraud’
Private school students who are entitled to taxpayer-funded special education services often turn to private providers and then seek reimbursement from the city. That claim is adjudicated by a hearing officer, who reviews documentation and hears testimony from the provider and parents.
In the lawsuit brought by Agudath Israel of America, the state education department highlighted reimbursement requests containing what officials called “outright fraud.”
One case revealed in court documents from August 2024 centered on a child with a disability who attended a private, religious school “concentrate[d] on Judaic studies which d[id] not have direct instruction in English reading or writing skills, and math skills,” according to court papers.
A special education firm assisting the child, Learning Learners, sought reimbursement at the rate of $215 per hour. The hearing officer wrote that the rate was excessive, in part because it was unclear how Learning Learners spent much of the money. The instructor for Learning Learners actually working with the child was only paid $85 an hour. “The objective was merely to extract as much money from the public fisc as possible,” the hearing officer wrote, upholding the lower rate. Learning Learners did not return an email.
In another instance outlined in court documents, the city’s special commissioner for investigation — an education department watchdog — found last year that a special education provider named Shira Gulkowitz, owner of Active Learning LLC, charged the education department $32,550 for services that the student never received using fraudulent signatures. An email to a different special education company apparently run by Gulkowitz was not returned.
In yet another example, a contract between a parent and provider for a child’s special education services appeared to be sloppily doctored to boost the rate from $150 per hour to $150 per half hour.
“The words ‘half hour’ are obviously in a different font and with a different background from the rest of the document,” special education hearing officer Oren Varnai wrote in the decision in June 2024. “The words ‘half hour’ were clearly superimposed on the original document.”
A hearing officer noted that “The words ‘half hour’ were clearly superimposed” on a contract for special education services at a private school. The modified version of the document appears lower.
Court filings
Varnai ruled that testimony from the firm’s head, who was not identified, was “not credible” and that documents from the special education provider “cannot be relied upon for any purpose.”
The parent was not reimbursed for any special education services.
But Weinstock, of Agudath Israel, said the alleged fraud didn’t change the city’s long, troubled history of special education mismanagement.
“Considering NYC’s nearly half-century public record of dysfunction and creation of this crisis, we find any recent attempt to shift blame to a particular religious or ethnic group disingenuous and deeply offensive,” he said. “This is about children. We should be working together to find a workable solution for the children who need it.”
‘An unregulated industry’
Seemingly every party involved in the system for reimbursing the parents of students with disabilities dislikes it.
In 2022, then-Schools Chancellor David Banks drew a direct connection between controversial education budget cuts and the ballooning spending on students with disabilities at private schools.
“All this money that is meant for the kids in our public schools are going to private schools,” Banks said during a meeting with parent advisers, according to a Chalkbeat report. “This is money that’s going out the back door every single day.”
In a legal filing last month, state education department lawyer Daniel Morton-Bentley wrote that the current system has fostered “an unregulated industry of independent special education teachers upon whom parents within the [city education department] are increasingly reliant.”
Many parents and special education attorneys argue it would be better if the city simply provided students with the services they’re entitled to, rather than litigating.
Overall, the city paid out a record $1.35 billion in special education case settlements last year.
Former schools Chancellor David Banks lamented how much taxpayer money was being spent on private schools.
Department of Education
Those settlements went to students with disabilities who fall into two categories. There are students whose families seek tuition reimbursement for private schools with specialized programs when the city’s public schools can’t serve them. Parents of children with dyslexia or developmental disabilities sometimes go this route.
There is also a separate group of students with disabilities who attend private schools — often religious schools — who qualify for taxpayer-funded special education instruction or services. The city doesn’t employ enough providers to meet demand, so many of those students use private providers and then sue for reimbursement.
Education department officials said it’s that second category of reimbursement requests that have surged in recent years, making up roughly two-thirds of the 26,000 cases filed last year. The requests are concentrated in Districts 14, 20 and 21 in Brooklyn, which all cover neighborhoods with large Hasidic or Orthodox communities, like Williamsburg and Midwood.
“It is deeply concerning that certain bad actors are creating unnecessary bottlenecks preventing students from accessing the services they need,” said department spokesperson Nicole Brownstein. “The abuse of legal processes in recent years, where too often fraud indicators are present, has victimized, first and foremost, families seeking to navigate an overwhelmed system.”
‘Critical changes’
As they face ballooning costs, a glut of cases clogging the system, court orders to speed things up and concerns about fraud, the city and state have reformed how they handle reimbursement cases.
“We’ve been working day and night … on several critical changes,” Vladeck said. “We have taken tremendous efforts to get our arms around this problem.”
The city’s changes include hiring more providers and opening weekend services originally created for public school students to private school students.
A family representative must be present at hearings on reimbursement requests. If a family hires an outside provider, that provider must be certified by the state.
The city has set a “fair market” rate for specialized instruction ($125 per hour for a common type of claim) and created a new, separate process for rate challenges to be evaluated.
But that separate process is now at the center of the lawsuit brought by Agudath Israel and several families. Weinstock, the Agudath official, noted those families include ones who are not from Hasidic communities, such as “a mother from Harlem whose child has cerebral palsy, now deprived of her aide to push her wheelchair and help use the bathroom, and a Hispanic family whose child has spina bifida.”
The suit argues the new rates are too low, and the changes have caused “a complete collapse of the private market” of providers, leaving many students without the services they desperately need.
“The NYCDOE could get costs under control by getting its own house in order, by fixing its systemic violation of the law, and by actually providing these mandated services to students” itself, the Agudath lawsuit says.