What Drives Special Education Spending: Evidence from Texas School Districts

Special education finance systems rely on observable indicators such as disability classifications and educational placements to allocate resources, yet limited evidence exists regarding whether these indicators correspond to the expenditures districts incur serving students with disabilities. This study examines variation in special education spending across Texas public school districts operating under a predominantly placement-based funding system. Using administrative and financial data from 6,116 district-year observations spanning the 2019-20 through 2024-25 school years, we investigate whether district expenditures are associated with educational placement, disability composition, enrollment characteristics, and district demographics. Descriptive analyses reveal substantial and persistent variation in special education spending across districts, particularly among smaller districts. Multivariate regression analyses indicate that districts serving larger proportions of students in highly self-contained placements and districts with higher concentrations of students with autism spend significantly more per student receiving special education services. However, educational placement, disability composition, and other observable district characteristics explain only a modest share of the variation in overall spending. These findings provide partial support for the logic underlying placement- and disability-based funding approaches while also highlighting the limitations of commonly used administrative proxies for capturing district resource needs. The results suggest that special education expenditures are shaped by additional organizational, fiscal, and contextual factors that are not reflected in traditional funding formulas, raising important questions about the design and adequacy of special education finance systems.