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Navigating New York State Special Education Programs Through the Pandemic

Since the pandemic started, New York State Education Department providers have been on a roller coaster of fluctuating special education enrollment, staffing, and program losses—and the pandemic’s effects aren’t over yet. Read on to learn what providers should do.
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Preschool and school-age special education programs licensed by the New York State Education Department (SED) faced unique challenges during the pandemic. These include the negative effects of extraordinary federal aid, low enrollment, staffing vacancies, and cost increases outpacing approved trend factors—making programs already difficult to operate now nearly impossible. From the very beginning of the public health emergency (PHE) in March 2020, SED providers have been on a roller coaster of fluctuating enrollment, staffing, and program losses. And the effects of the pandemic are not over yet.

Depending on each program’s unique challenges, schools have incurred significant Non-Direct Screen losses and/or Total Cost Screen losses during the pandemic years. Sometimes the Non-Direct Screen loss also results in schools underspending their tuition rate. In situations where the underspending affects multiple years, it also eliminates the benefits of the “higher of” methodology, which could result in a permanent decline in funding.

For its part, SED has expanded the availability of the Enrollment Adjustment Factor (EAF), as well as obtaining the Division of Budgets (DOB) agreement to process pandemic-related waiver requests for both Total Cost Screen and Non-Direct Screen losses to address extraordinary circumstances caused by the pandemic. However, the unique calculation used for the EAF does not always address a school’s enrollment decline, and it does not address losses caused by the Non-Direct Screen. And what exactly DOB will address as extraordinary circumstances is yet to be seen.

What hasn’t been addressed is how SED will deal with the negative effects of extraordinary federal aid, including the Paycheck Protection Program (PPP). Since most organizations accounted for the PPP as a loan, it was not recognized as revenue in the year(s) that it was used to pay for expenses. SED’s current stated position is that it will be treated as offsetting revenue in the year that it is recognized on the CFR. This creates a misalignment of the revenue offset and the expenses that it was used for. In addition, the methodology currently will disallow Non-Direct Screen losses prior to treating PPP as offsetting revenue. This would result in the PPP being offset against allowable and reimbursable costs even though there were unreimbursed non-direct costs that were paid for with this funding. This disconnect of accounting and reimbursement rules is creating a situation where the impact of extraordinary federal aid may require a rate appeal to address the negative impacts of the PPP loan on a school’s rate setting.

Besides the impact of fluctuating enrollment and staffing, there also has been a significant increase in the disabilities of the children being served. This has resulted in an increase in related service mandates along with the need for smaller, more intensive class ratios. Both situations are creating losses in SED programs, which may require tuition rate waivers.

Given the financial and operational challenges during the pandemic and afterward, SED providers should evaluate the need to file waivers and the resulting financial impact going forward. To file a waiver, schools must first analyze their program operations to identify trends or events causing losses. Since the Total Cost Screen is calculated on a per diem basis, schools must separate the effects of enrollment declines from changes in expenditure levels. Programs also must look at the effect of the decline in direct costs due to staffing or enrollment issues on the calculation of their Non-Direct Screen. As part of the waiver process, schools also should review their operations to highlight the program’s teaching and related service staff efficiency levels or be able to explain why they aren’t operating at optimal levels.

How FORVIS Can Help

FORVIS has staff dedicated to the reimbursement, cost reporting, and compliance issues facing the IDD & Behavioral Health community, including SED providers. We’ve been working on tuition rate waivers for more than 30 years and know how to help you successfully identify and address losses in SED programs. We know which strategies have been successful and which ones have not. We can assist your organization with analyzing your programs’ operations and losses to identify areas that can be addressed with waivers and develop strategies to address those that cannot.

If you have questions or need assistance, please reach out to a professional at FORVIS or use the Contact Us form below.

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