What does the excess cost standard require?

IDEA Part B funds can be used only for expenses above and beyond what is spent on average on an elementary or secondary school student, which is known as “excess cost.” The excess cost standard requires LEAs spend at least as much on children with disabilities as is spent on children without disabilities before using IDEA funds.

Is the excess cost requirement applied at the district level or the intermediate school district (ISD) level?

The excess cost requirement is applied at the ISD level. This means that member districts’ expenditures and student counts are aggregated together before Catamaran performs calculations for the ISD. Member district calculations will be available in the activity for reference only, but the Michigan Department of Education (MDE) Office of Special Education (OSE) will only conduct compliance testing at the ISD aggregate level.

How are excess cost thresholds calculated?

Catamaran calculates excess cost thresholds for a given school year using the following steps:

  1. Sum all local, state, and federal expenditures from the prior school year.
  2. Deduct certain expenses, such as debt service, capital outlays, state and local special education, and other expenses from the total above, resulting in an adjusted expenditure amount.
  3. Divide the adjusted expenditure amount by the total number of students (general and special education) from the prior year, resulting in an annual per-pupil expenditure (APPE).
  4. Multiply the APPE by the number of students with disabilities in the ISD during the current year, resulting in the threshold.

The excess cost threshold is the minimum amount of funds that must be spent within an ISD—in the aggregate—on educating students with disabilities before using IDEA Part B funds. This procedure follows the calculation described in 34 CFR Appendix A to Part 300.

Note: Federal regulations require excess cost thresholds be calculated separately for elementary and secondary students.

How is excess cost compliance calculated?

Catamaran performs the excess cost compliance calculation for a given school year using the following steps:

  1. Sum all local, state, and federal expenditures from the prior school year.
  2. Deduct certain expenses, such as debt service, capital outlays, state and local special education, and other expenses from the total above, resulting in an adjusted expenditure amount.
  3. Divide the adjusted expenditure amount by the total number of students (general and special education) from the prior year, resulting in an annual per-pupil expenditure (APPE).
  4. Multiply the APPE by the number of students with disabilities in the ISD during the prior year.
  5. Add the state and local special education costs from the prior year, resulting in the excess cost expenditure calculation.

If the excess cost expenditure calculation exceeds the threshold, the compliance requirement is met.

Note: Federal regulation require excess cost compliance be calculated separately for elementary and secondary students.

If the excess cost requirement is applied at the ISD level, do member districts have a role in excess cost?

Yes. Member districts, together with ISDs, must record expenditures and student counts that Catamaran will use to perform excess cost calculations at the ISD aggregate level. Member districts will submit expenditure and student count data to the ISD for review and inclusion in the aggregate calculations.

Why does the Catamaran Excess Cost activity require the submission of new financial information? Can’t excess cost calculations be performed using financial data stored elsewhere?

Federal regulations require excess cost be calculated separately for elementary and secondary students and prohibit simple proration based on the number of elementary and secondary students. Therefore, none of the existing reporting mechanisms allow for excess cost to be calculated in accordance with federal regulations.

What is the timeline for setting thresholds and testing compliance?

The Catamaran Excess Cost activity will take place once annually and has two components: threshold setting and compliance testing. Each activity will test compliance for the prior year and set thresholds for the current year. Excess cost thresholds are calculated using both expenditure and headcount data from the prior year and the special education headcount from the current year. Excess cost compliance is calculated using only expenditure and headcount data from the prior year.

For example, in the 2020-21 school year the Excess Cost activity will do the following:

  1. Collect expenditure and headcount data predominantly from the 2019-20 year (it will also collect one piece of information from the 2020-21 year);
  2. Calculate excess cost compliance for the 2019-20 year; and
  3. Set new thresholds for the 2020-21 year.

The activity is made available in November and must be completed near the end of February.

Will ISDs be penalized for not meeting t­he compliance requirement for the 2019-20 school year?

The MDE considers the excess cost threshold and compliance calculations for 2019-20 a pilot exercise that primarily serves the purpose of learning about the excess cost requirement, gathering feedback, and discovering issues with processes and/or calculations. The MDE will follow up with ISDs who submit excess cost compliance results with the status NOT MET to collaboratively investigate data quality issues or concerns that may have unintentionally led to such a status. The assumption will be that a data or computational error led to such a status, unless it is discovered otherwise.

The first genuine excess cost compliance test will consider the 2020-21 school year and take place in the fall of 2021.

What is the difference between maintenance of effort and excess cost?

The maintenance of effort (MOE) requirement considers only expenditures for special education and ensures that ISDs expend the same level of local, or state and local, effort on special education comparing the current year to the prior year(s). The excess cost requirement considers all expenditures and ensures IDEA Part B funds are only used for the excess costs of special education, or those costs which are in excess of an annual per-pupil general education calculation. The excess cost calculation is performed annually and is not compared to the prior year(s). More information about these differences is available in the resource, Key Differences between IDEA Local Educational Agency Maintenance of Effort and Excess Cost Requirements.