Civic Report 32 - Effects of Funding Incentives on Special Education Enrollment This report examines the effect state funding methods have on the number of students enrolled in special education. It finds that states with 'bounty' funding systems provide financial incentives to schools to increase the identification of students with special needs by paying schools more for each additional student in special education. The authors find that those incentives are responsible for 62% of the increase in special education enrollment in those states over the past decade. Nationally, the report shows that this has led to roughly 390,000 children wrongly placed in special education programs at an annual cost of $2.3 billion. The authors also find that high-stakes testing, which has been suggested as an alternative culprit for the increase, has no significant effect on special education enrollment. December 2002
