The first reimbursement for special education funding for Wisconsin schools was lower than expected. It didn’t come as a shock to area school districts.
When the 2025-27 state biennial budget was approved last summer, a 42% reimbursement rate was included for the 2025-26 school year, along with a bump to 45% for 2026-27. Previously, it was 32%, although 90% has long been the goal for the Department of Public Instruction.
In November, an email was sent out from the DPI informing districts that the initial payment to school districts would reimburse them for 35% of related costs for services they are legally obligated to provide.
“It wasn’t a surprise that the reimbursement fell below 42%, since the appropriation was sum certain rather than sum sufficient,” said Aaron Tarnutzer, district administrator for McFarland. “McFarland had already planned on this amount being closer to 35%. That said, we were disappointed by how far it dropped.”
‘Sum certain’ vs. ‘sum sufficient’
The difference between “sum certain” and “sum sufficient” funding models is significant. According to Tarnutzer, sum certain sets a fixed dollar amount for special education reimbursement, while sum sufficient would commit the state to funding a set percentage of actual special education costs, which allows for reimbursement to increase to match any rise in costs.
Referring to the sum certain model, Tarnutzer said, “If statewide special education costs increase, as they routinely do due to inflation, staffing needs, and student services, the reimbursement percentage automatically drops because the total funding does not adjust to actual costs. For school districts, this creates uncertainty and shifts financial risk to the local level often resulting in districts, including McFarland, seeking an operational referendum to account for these costs.”
Sum sufficient is a more ideal arrangement for school districts.
“If the state were to move to a sum sufficient model, it would provide districts with greater predictability, reduce the need to backfill mandated costs with local general education dollars and help stabilize both special education and general education budgets. Ultimately, it would shift funding responsibility back toward the state for services the state requires districts to provide,” Tarnutzer said.
There is hope that the state is just being conservative initially with reimbursements, according to Steve Summers, executive director of operations. He believes the state will up its reimbursement percentages as the year goes on to at least 38-39%. However, there is no guarantee it will. If not, school districts will pay the difference.
“At roughly 35%, the reimbursement does not keep pace with inflation, which significantly increases the amount districts must absorb locally,” said Tarnutzer. “While we play for some level of shortfall, this degree of underfunding creates additional pressure on general education budgets and local taxpayers.”
Kathleen Davis-Phillips is the director of business and auxiliary services for the DeForest Area School District. As was the case with McFarland, she did not budget for 42% special education reimbursement in DeForest’s 2025-26 budget. She said many of her colleagues tried to convince legislators to consider that the numbers they were basing their state budget decision on were “way low.”
However, their advocacy fell on deaf ears, she said.
“And so, many of us business managers probably budgeted less than that amount,” said Davis-Phillips. “But even so, the difference from what I was budgeting, which I thought at the time was conservative, and based on in the past when they promised a certain percentage, you’d be a few percentage points below that. It still is a shortfall for us.”
To give a greater perspective, Davis-Phillips said that if DeForest had budgeted for 42% and the reimbursement dropped to 35%, it would be a shortfall of $850,000 for the district. However, since DeForest budgeted for a lower reimbursement than what was promised, that shortfall would be $600,000 if funding remains at 35% for the school year.
Timing is another issue. Davis-Phillips talked about having to navigate the uncertainty mid-year, when districts must establish a school year’s budget and tax levy by November.
“By statute, we have to build our budget. We have to get the levy out,” said Davis-Phillips. “There are certain things we have to do. And then to find out later in the year … oops, it’s not as much as originally thought, it’s problematic for school districts because it’s not like we can’t just serve the needs of our special ed students or students with special needs.”
Rising special education costsDavis-Phillips estimated that in recent years, special education expenses have gone up by 12-14%. However, she said DeForest is different in that it is a growing district.
Tarnutzer said he saw a report that indicated that special education costs in Wisconsin rose by 103% between 2000 and 2024. He said they were driven by increased demand for specialized services, more specialized programming, higher staffing costs and inflation, and the costs have gone up faster than local budgets can keep up with.
Like other nearby districts, Marshall had braced for less of a reimbursement from the state, taking budgetary precautions. Brian Zacho, Marshall’s business manager, described the special education situation as “one of the flawed parts” of the state’s overall school funding formula.
“So, you look at it, they say it’s sum certain,” said Zacho. “So, the legislature, they’re going to put a certain dollar amount. and then they guesstimate how much that is, but there’s only so much in that pot of money. And then when we all request that aid, like we are throughout the state, that money doesn’t get bigger. It gets to be less and that’s what’s happening. So, you’re seeing a sum certain amount instead of sum sufficient where they would give us at the state level what every school needs at that percentage point.”
That means more of the burden is transferred then to local taxpayers, said Zacho.
“So, I guess what you’re seeing is more and more of what we have to do continues to be pushed on to our tax base, right?” said Zacho. “Like our municipalities, our community has to continue to fund where we’re at, and that’s why you’re seeing record numbers of referendums being passed because the formula is broken.”
Tarnutzer explained how such inadequate special education funding can have a ripple effect.
“Because districts are legally required to provide all special education services, any shortfall in state funding must be covered locally,” said Tarnutzer. “That typically means using a larger share of the general education fund, which can limit resources for other programs, staffing and classroom support. It results in many districts, including McFarland, seeking an operational referendum to account for these costs.”
Additionally, the state’s voucher program for private schools takes more funding away from the general budgets of public schools, squeezing their finances even tighter, according to Zacho. He feels moving to a sum sufficient model would relieve some of the stress public schools are under to educate students with the most severe special education disabilities.
“So, you have some kids that have some learning curves and deficits that other students don’t, and they’re really high-cost kiddos,” said Zacho. “And so, when you’re trying to get them the best programming you can, and when you can actually fund it at the level you’re supposed to fund it at, those kids are going to receive an education better than what they have right now. I mean, I think it’s a really good education they’re getting right now, but we’re scraping by and using our taxpayers and our fund balances and everything else to make that happen.”
Two kinds of reimbursementsSummers explained how there are two major investments in special education in the state biennial budget. One is called “high-cost special education aid” and the other is “state special education categorical aid,” which is the type referred to with the 35% reimbursement that’s been in the news.
The situation is similar with both, according to Summers, in that a specific dollar amount — i.e., a sum certain figure — is stipulated to fund both programs. An estimate is provided to the State Legislature for what it is believed to cover.
With high-cost special education aid, the estimate is a 50% reimbursement rate in 2025-26, moving up to 90% in 2026-27.
“That estimate is based on predictions of how many districts are going to apply for those funds, what the cost is going to be, etc.,” said Summers.
As for state categorical special education aid, the payments are broken up throughout the year. News of the 35% reimbursement rocked the educational community.
Waunakee, like the other districts mentioned here, did not include a 42% reimbursement for special education in its 2025-26.
Summers said there’s been confusion across the state about where the reimbursement percentage will eventually land.
“So, what the DPI has said is that they are providing a lower-than-expected payment at 35% to make sure they don’t overpay districts as they complete the process of auditing ’24-’25 records. So, the auditing process is still ongoing,” said Summers, adding the Waunakee School Board will be looking to approve the audit in January.
Summers said that a school finance expert he knows has downloaded all the data from the DPI website and has calculated that the final amount will be about 38.5%.
“And so, it is very likely that as we go through the rest of the year, the DPI will make an adjustment at the end to raise the percentage higher than the 35%. Will it be exactly 38.5%? No, but it probably won’t be significantly far from that.”
If it does end up at 38.5%, that amount would be slightly above what Waunakee budgeted for a special education reimbursement, according to Summers.
“Because we wanted to take a more conservative approach to budget planning, because in the previous fiscal year, we had a pretty decent sized shortfall in state special education categorical aid than we anticipated it to be, compared to what happened from the last state budget,” said Summers. “So, we did learn from that.”
While Summers said Waunakee is in a good position currently with its special education budget, it would not be if the reimbursement percentage does end up at 35%. At 38.5%, Waunakee would not have a loss of special education funding from what it estimated.
Regarding high-cost special education funding, Summers said Waunakee budgeted 10% lower than the 50% initially touted by the state, but he’s not sure if that’s enough. He said it will depend on how many districts apply.
Monica Kelsey-Brown, Waunakee’s superintendent, said that Waunakee’s special education programming and instruction shouldn’t be impacted — that is if the 38.5% reimbursement comes to fruition. However, she added other districts may not be so fortunate.
Considering the issue in totality, Summers indicated school districts across the state are wary about the funding.
“I will say, though, again, state budget advocates or school advocates would say Waunakee shouldn’t have to budget like that, right?” said Summers. “If the state budget is saying we’re going to get to 42% and 45%, schools should have the confidence to be able to budget for 42% and 45%, but I will say schools don’t have that confidence that those percentages are something you can budget for because our past practice has taught us that if we make those assumptions, there’s a very good chance that we will be budgeting for revenues we don’t receive.”