SC Loses $36 Million in Federal Funds, Scrambles to Avoid Losing $75 Million More

South Carolina has already lost $36 million in federal matching money and is scrambling to avoid losing another $75 million for not spending enough on special education the last two years.

The federal government requires states to spend a certain amount on special education and penalizes states that don't. South Carolina is being penalized $36 million for not spending enough during the fiscal year that ended June 30, 2010.

The state would lose another $75 million for not spending enough in the current fiscal year, which ends June 30, 2011, so the state Department of Education is planning to send $75 million to local school districts before July 1. The districts will have to use the money for special education needs, like special-education teachers, assistants, classroom supplies and physical therapy.

So why didn't the state spend what it was supposed to on special education students?

State Department of Education spokesman Jay W. Ragley says, "Well, it seems to be from the previous administration that communication to the General Assembly about this issue wasn't very clear and consistent. And so the General Assembly, while it was dealing with the budget crisis, was reducing funding for education overall, inadvertently did not know they were also reducing funding for special education."

He says another problem was the transition from former state superintendent Jim Rex to current superintendent Mick Zais, who took office in January. Ragley says Dr. Rex apparently didn't tell state lawmakers about the issue and Dr. Zais didn't find out about it until March.

The state is appealing the loss of the $36 million. If the state is not able to get it overturned, it will continue to lose $36 million in federal money every fiscal year from now on.

So where will the $75 million come from that the state Department of Education will send to school districts?

Because the state's economy has improved somewhat, the state has taken in more than expected from the Education Improvement Act extra one-penny sales tax. Diesel costs have also been lower than expected for the state's school bus fleet. Ragley says the $75 million will come from those two areas, "And so it's not going to take money from any programs that are in this year's budget or in next year's budget."

He says the department and state lawmakers are also taking steps to try to prevent this from ever happening again. First, the governor and General Assembly will be notified each year of how much the state needs to spend in order to receive the federal matching money.

Second, if the state does reduce overall education spending, special education funding will be protected from the cuts to prevent the loss of the federal money.