Original Notice.

Preproposal statement of inquiry was filed as WSR 99-11-065.

Title of Rule: WAC 392-140-600 through 392-140-685 [392-140-680], state special education safety net funding.

Purpose: To update special education safety net eligibility standards to reflect changes in the state Operating Appropriations Act and to clarify procedures for making safety net awards.

Statutory Authority for Adoption: RCW 28A.150.290.

Statute Being Implemented: Section 507(7), chapter 309, Laws of 1999.

Summary: Numerous minor changes are proposed to conform to new state budget language, provide better information to the state safety net oversight committee, and clarify the application process.

Reasons Supporting Proposal: Changes are needed to comply with changes in the 1999-2001 state operating budget and to improve the safety net process.

Name of Agency Personnel Responsible for Drafting: Ben Gravely, Office of the Superintendent of Public Instruction, (360) 753-2298; Implementation: Allen H. Jones, Office of Superintendent of Public Instruction, (360) 753-6708; and Enforcement: Michael L. Bigelow, Office of Superintendent of Public Instruction, (360) 753-1718.

Name of Proponent: Office of Superintendent of Public Instruction, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: Changes to implement the 1999-2001 State Operating Appropriations Act:

• Allowable indirect rates are increased to the federal indirect restricted rate plus 1%.

• Safety net awards are reduced for districts not maximizing Medicaid billing.

• Safety net awards must be adjusted for audit finding.

Clarifications of existing policies:

• Continuing awards for demographic needs must demonstrate a "continuing" adverse change.

• Standards for demonstrating financial need on Worksheet "A" are clarified.

• Awards may be adjusted based on a review of the need demonstrated for safety net money awarded in a prior year.

Policy changes:

• Districts demonstrating need for safety net funding shall explain and justify excess cost accounting methodology.

• Available state money can be used for high cost student awards if federal money is insufficient.

Proposal Changes the Following Existing Rules: As described above. Changes are relatively minor.

No small business economic impact statement has been prepared under chapter 19.85 RCW. No small business impacts have been identified.

RCW 34.05.328 does not apply to this rule adoption. Not relevant.

Hearing Location: Brouillet Conference Room, 4th Floor, Old Capitol Building, P.O. Box 47200, Olympia, WA 98504-7200, on November 23, 1999, at 9:00 a.m.

Assistance for Persons with Disabilities: Contact Sheila Emery by November 9, 1999, TDD (360) 664-3631.

Submit Written Comments to: Legal Services, Office of Superintendent of Public Instruction, P.O. Box 47200, 600 South Washington Street, Olympia, WA 98504-7200, fax (360) 753-4201, by November 22, 1999.

Date of Intended Adoption: November 24, 1999.

October 8, 1999

Dr. Terry Bergeson

Superintendent of

Public Instruction

OTS-3396.1

AMENDATORY SECTION(Amending Order 96-15, filed 9/18/96, effective 10/19/96)

WAC 392-140-600
Special education safety net--Applicable provisions.

The provisions of WAC 392-140-600 through 392-140-685 apply to the determination of safety net allocations of state special education moneys and Individuals with Disabilities Education Act (IDEA) federal discretionary moneys ((for the 1996-97 school year)).

[Statutory Authority: RCW 28A.150.290 and 1995 2nd sp.s. c 18 as modified by 1996 c 283.  96-19-095 (Order 96-15), § 392-140-600, filed 9/18/96, effective 10/19/96.]

The authority for WAC 392-140-600 through 392-140-685 is:

(1) ((Section 507, chapter 149, Laws of 1997, the)) The appropriation language for special education programs in the Washington state Biennial Operating Appropriations Act; and

(2) RCW 28A.150.290(1).

[Statutory Authority: RCW 28A.150.290 and 1997 c 149 § 507(8). 98-08-013 (Order 98-05), § 392-140-601, filed 3/18/98, effective 4/18/98.  Statutory Authority: RCW 28A.150.290 and 1995 2nd sp.s. c 18 as modified by 1996 c 283.  96-19-095 (Order 96-15), § 392-140-601, filed 9/18/96, effective 10/19/96.]

Application for safety net funding shall be made on Form SPI 1381 published by the superintendent of public instruction as follows:

(1) School districts may make application for safety net funding on the basis of one or more of the following:

(a) Maintenance of effort (state revenue only) hereafter referred to as MOESR.  State safety net funding may be requested when a district shows a MOESR loss calculated by the superintendent of public instruction pursuant to WAC 392-140-620.

(b) Special characteristics and costs.  State safety net funding may be requested by a school district with special education costs of providing services that are reasonable, but differ significantly from the assumptions contained in the state special education funding formula provided that the applicant school district meets the standards of WAC 392-140-613 and can demonstrate, pursuant to WAC 392-140-625 either of the following:

(i) The district's actual resident special education enrollment exceeds the district's funded resident special education enrollment, the district has adopted a plan of action to contain or eliminate any unnecessary, duplicative, or ineffective enrollment practices, and all available funding, including state, federal, and local if provided in the past, is insufficient to meet the expenditure level necessary for special education; or

(ii) The district's resident special education enrollment percentage is equal to the funded special education enrollment percentage and the district has incurred an adverse change in the demographics of its resident special education enrollment ((since the prior school year)), and all available funding, including state, federal, and local if provided in the past, is insufficient to meet the expenditure level necessary for special education.

(c) High-cost individual student.  A school district may submit applications for ((federal)) safety net funding for high-cost individual students meeting the standards in WAC 392-140-616.

(2) The school district making application for safety net funding shall certify that:

(a) The application complies with the respective safety net application standards of WAC 392-140-610, 392-140-613, or 392-140-616;

(b) The application provides true and complete information to the best of the school district's knowledge; and

(c) The district understands that safety net funding is not an entitlement, is subject to adjustment and recovery, may not be available in future years, state safety net funding must be expended in program 21 which impacts the amount that must be maintained for the federal maintenance of effort test, and federal safety net funding must be expended in program 24.

(3) Worksheets included with the application shall demonstrate the need for safety net funding.  School districts are encouraged and may be required to submit additional information designed to assist the state oversight committee in analyzing the application.

(a) MOESR applications pursuant to subsection (1)(a) of this section do not require any worksheets.

(b) Special characteristics and costs applications pursuant to subsection (1)(b)(ii) of this section require completion of the narrative and worksheets described in WAC 392-140-625.

(c) High-cost individual student applications shall include completed budget forms SPI F-1000B and SPI E-795B, and worksheets "A" and "C" published in the safety net application.

[Statutory Authority: RCW 28A.150.290 and 1997 c 149 § 507(8). 98-08-013 (Order 98-05), § 392-140-605, filed 3/18/98, effective 4/18/98.  Statutory Authority: RCW 28A.150.290 and 1995 2nd sp.s. c 18 as modified by 1996 c 283.  96-19-095 (Order 96-15), § 392-140-605, filed 9/18/96, effective 10/19/96.]

For a school district requesting state safety net funding due to special enrollment characteristics of the district and costs of providing services which differ significantly from the assumptions contained in the state special education funding formula, the district shall demonstrate at a minimum that:

(1) IEPs are appropriate and are properly and efficiently prepared and formulated.

(2) The district is making reasonable effort to provide appropriate services for students in need of special education utilizing state funding generated by the basic education apportionment and special education funding formulas.

(3) The district's special education services are operated in a reasonably efficient manner and the district has adopted a plan of action to contain or eliminate any unnecessary, duplicative, or inefficient practices.

(4) Indirect costs included for purposes of determining safety net allocations do not exceed the allowable percent for the federal special education program plus one percent.

(5) Any available federal funding is insufficient to address the additional needs.

(6) The costs of any supplemental contracts are not included for purposes of determining safety net allocations.  Supplemental contracts are those contracts made pursuant to RCW 28A.400.200(4) excluding extended school year contracts (ESY) required by an IEP.

(7) The costs of any summer school instruction are not included for purposes of making safety net determinations excluding extended school year contracts (ESY) required by an IEP.

[Statutory Authority: RCW 28A.150.290 and 1995 2nd sp.s. c 18 as modified by 1996 c 283.  96-19-095 (Order 96-15), § 392-140-613, filed 9/18/96, effective 10/19/96.]

Applications pursuant to WAC 392-140-605 (1)(b) must demonstrate special characteristics and costs as provided in this section.

(1) Applications from districts with actual enrollment greater than funded enrollment pursuant to WAC 392-140-605 (1)(b)(i) must demonstrate, through the application narrative, that the district has adopted a plan of action to contain or eliminate any unnecessary, duplicative, or ineffective enrollment practices. The district shall demonstrate a financial need on worksheet "A" of the application.  Applicants shall cooperate with the special education program audit team and shall provide the team with any information required by the team to review and verify certifications made on the safety net application.

(2) Applications from districts with actual enrollment equal to funded enrollment pursuant to WAC 392-140-605 (1)(b)(ii) must demonstrate, through the application narrative and on application worksheet "A" and "B," an adverse change in resident special education enrollment characteristics and program costs ((since the prior school year)). For initial awards, the district must demonstrate adverse change since the prior school year. For continuing awards, the district must demonstrate continued adverse change.

(a) The application narrative completed by the school district shall provide any information and explanations related to special enrollment characteristics as required in the published instructions.

(b) Application worksheet "A" shall demonstrate a financial need by displaying the school district's special education expenditures, revenues, and special education enrollments for the prior and current school years.  Application worksheet "B" shall display changes in staff services and staff-to-ratios between the prior and current school years.

(c) Cost differences between the current and prior school years shall be explained in the application narrative.  The application narrative shall detail cost differences in services to students which occurred between the current school year and the prior school year.  Such details shall include costs and savings associated with each change in services.

(d) A fiscal need shall be demonstrated through the application narrative, on application worksheets "A" and "B," and other information available to the state oversight committee.  ((Fiscal need shall be demonstrated as follows:

(i) The application narrative shall provide information and explanations related to fiscal need pursuant to the published instructions.

(ii) Application worksheets "A" and "B" shall demonstrate a fiscal need in excess of the sum of:

(A) All current school year safety net awards to the district for MOESR or special characteristics and costs;

(B) Any previous high cost individual safety net awards for the current school year; and

(C) All other available revenue for special education including all carryover of federal special education revenue.

(iii) The school district shall provide additional information as requested by the state oversight committee.))

[Statutory Authority: RCW 28A.150.290 and 1997 c 149 § 507(8).  98-08-013 (Order 98-05), § 392-140-625, filed 3/18/98, effective 4/18/98.  Statutory Authority: RCW 28A.150.290 and 1995 2nd sp.s. c 18 as modified by 1996 c 283.  96-19-095 (Order 96-15), § 392-140-625, filed 9/18/96, effective 10/19/96.]

Applications for special characteristics and costs and high cost individual students shall demonstrate financial need as follows:

(1) Application worksheet "A" shall demonstrate a fiscal need in excess of the sum of:

(a) All current school year safety net awards to the district for MOESR or special characteristics and costs;

(b) Any previous safety net awards for the current school year; and

(c) All other available revenue for special education, including all carryover of federal special education revenue.

(2) Awards for special characteristics and costs pursuant to WAC 392-140-605 (1)(b)(ii) and high cost individual awards shall not exceed the amount of need demonstrated on the worksheet "A."

(3) Worksheets submitted with safety net applications are to reflect an excess cost basis of accounting, consistently applied for both years presented. The district may be required to describe the district's excess cost methodology.

(4) The safety net oversight committee may revise the district's worksheet "A" submitted for errors or omissions.

(5) The school district shall provide additional information as requested by the state oversight committee.

(6) After the close of the school year, the safety net oversight committee may review the worksheet "A" used to determine need for a district's award against the actual final school year enrollments, revenues, and expenditures reported by the district. Based upon the results of this review:

(a) The safety net allocation for the school year may be adjusted or recovered; or

(b) If the committee finds that a portion of the safety net allocation was not needed to balance revenues and expenditures, the committee may consider that portion of the allocation available to meet the needs of the ensuing school year.

[]

The special education program audit team consists of staff of the state auditor's office funded in the Biennial Operating Appropriations Act to audit special education programs that exhibit unusual rates of growth, extraordinarily high costs, or other characteristics requiring the attention of the state safety net oversight committee.  When reviewing a school district's special education program, the audit team shall review and verify any certifications and supporting information provided by the district in a safety net application.  The audit team shall provide the results of the review to the state oversight committee.  The results of the audit team's review ((may)) shall be considered by the oversight committee in determining, adjusting, or recovering safety net awards.

[Statutory Authority: RCW 28A.150.290 and 1997 c 149 § 507(8).  98-08-013 (Order 98-05), § 392-140-630, filed 3/18/98, effective 4/18/98.]

The total amount allocated to school districts may not exceed the authorized appropriation.

(1) The ((initial)) special education safety net allocation ((of state moneys for applicants)) shall be the smaller of:

(a) The amount requested by the school district; or

(b) The amount authorized by the state oversight committee.

(2) ((The initial)) If the district requests and the oversight committee approves the "full" allocation permitted by a state formula, then the allocation shall be adjusted periodically during the year and again in January after the close of the school year to reflect the amount determined under the formula.

(3) Special education safety net allocations of state moneys for special characteristics applicants under WAC 392-140-605 (1)(b) shall be prorated if ((the state)) total year-to-date state allocations for all safety net applications ((under WAC 392-140-605 (1)(a) and (b))) exceed the authorized appropriation for that school year.

[Statutory Authority: RCW 28A.150.290 and 1997 c 149 § 507(8).  98-08-013 (Order 98-05), § 392-140-660, filed 3/18/98, effective 4/18/98.  Statutory Authority: RCW 28A.150.290 and 1995 2nd sp.s. c 18 as modified by 1996 c 283.  96-19-095 (Order 96-15), § 392-140-660, filed 9/18/96, effective 10/19/96.]

Safety net allocations ((amounts for a school district)) may be adjusted ((during the school year)) as follows:

(1) ((The initial state and federal)) For those districts not maximizing Medicaid billing for special education students under chapter 318, Laws of 1999, special education safety net allocations shall be reduced by the estimated potential additional incentive payments for the school year if the district maximized Medicaid incentive payments. Potential additional incentive payments shall be estimated by the superintendent of public instruction based on the district's percent of Medicaid eligible students billed and a state-wide average incentive payment per student determined by the superintendent in October of the school year. The average incentive payment per student shall be determined using the prior school year's state-wide Medicaid billing data assuming fifty percent incentive payments for all school districts. The superintendent of public instruction shall update Medicaid billing adjustments to safety net allocations periodically during the school year and again in January following the close of the school year.

(2) Special education safety net allocations ((amounts)) for a school district may be adjusted to reflect changes in factors for which additional or revised information becomes available after the awarding of the initial safety net allocation.  This means:

(a) MOESR awards for the "full" amount shall be increased, reduced, or nullified when a recalculation pursuant to WAC 392-140-620 results in a ((loss smaller than any loss)) change in the amount previously calculated pursuant to WAC 392-140-620.

(b) Special characteristics and costs awards for the full amount under WAC 392-140-605 (1)(b)(i) shall be increased, reduced, or nullified when the district's enrollment or state funding factors change.

(c) Special characteristics and costs awards may be reduced or nullified when the school district's actual revenues and expenditures for the school year differ significantly from the estimates on which the initial safety net award was based.

(((c))) (d) A school district's safety net award may be adjusted by the safety net oversight committee based on the results of the review conducted by the special education program audit team pursuant to WAC 392-140-630.

(((2) The initial special education safety net)) (3) Allocations of state moneys for special characteristics applicants under WAC 392-140-605 (1)(b) shall be ((subject to additional proration)) prorated if total state allocations for all safety net applications under WAC 392-140-605 (1)(a) and (b) exceed the authorized appropriation for that school year. Allocations shall be restored to full funding if additional appropriation authority becomes available.

[Statutory Authority: RCW 28A.150.290 and 1997 c 149 § 507(8).  98-08-013 (Order 98-05), § 392-140-675, filed 3/18/98, effective 4/18/98.  Statutory Authority: RCW 28A.150.290 and 1995 2nd sp.s. c 18 as modified by 1996 c 283.  96-19-095 (Order 96-15), § 392-140-675, filed 9/18/96, effective 10/19/96.]

State safety net funding is provided in revenue account 4121.  Safety net funding:

(1) Shall be recovered or reduced for the following reasons:

(a) Unexpended account 4121 revenues are recovered in the subsequent school year pursuant to WAC 392-122-900.

(b) Any necessary adjustments pursuant to WAC 392-140-675 were not previously made.

(c) The periodic and/or final MOESR calculation performed by the superintendent of public instruction determines that a lesser amount is needed for maintenance of effort (state revenue only).

(d) ((The district did not use or failed to apply for available Medicaid or federal flow-through special education funding.

(e))) The application contains a falsification or deliberate misrepresentation, including omission of a material fact.

(((f))) (e) The state auditor's financial and legal compliance audit includes findings which materially affect the school district's safety net application.

(2) May be recovered or reduced for the following reasons:

(a) IEPs are determined at a later date through state audit or child count verification to be inappropriate or improperly prepared, and appropriate and proper preparation would materially affect the justification or amount of need for safety net funding.

(b) The school district has carryover of federal flow-through special education funding from the previous school year.

(c) The state oversight committee finds grounds for adjustment in the special education program audit team's review pursuant to WAC 392-140-630.

[Statutory Authority: RCW 28A.150.290 and 1997 c 149 § 507(8).  98-08-013 (Order 98-05), § 392-140-680, filed 3/18/98, effective 4/18/98.  Statutory Authority: RCW 28A.150.290 and 1995 2nd sp.s. c 18 as modified by 1996 c 283.  96-19-095 (Order 96-15), § 392-140-680, filed 9/18/96, effective 10/19/96.]

     The following section of the Washington Administrative Code is repealed:

WAC 392-140-665

Special education safety net--Approved application--Initial federal special education safety net allocation.

© Washington State Code Reviser's Office