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Are Private Special Ed Schools Better? An Unanswerable Question, State Audit Says

Apr 2, 2018

The system that oversees private special education schools in Connecticut needs an overhaul, according to a recent state audit. About 3,000 students with severe needs are currently placed in these schools, mostly at the expense of public school districts.

The audit found, however, that there’s little evidence to show whether these costly programs are working. Expenses have risen by 150 percent since 1997, compared to total education spending, which hasn’t quite doubled yet, according to state data.

But for parents of children with disabilities, special education is one of the most important legal requirements around, as it ensures their children get an appropriate education. Meliora Academy, for example, is a for-profit special education school in Meriden. Most of its students are on the autism spectrum, and many parents said they really like its education programming.

But average tuition at Meliora is more than double that of other similar schools, according to the audit. And it’s profitable -- after expenses, the school made about $600,000 in 2016, according to owner Sheldon Wagner.

"The fact that it generates profit that is then subsequently used to increase the value and quality of the school is not a bad thing," Wagner said.

That profit was part of a large deposit into an interest-bearing  account, that Wagner said will be used for capital improvements at the school.

He also said he’s not sure what sort of profit margin would be fair for a school like his to make. So he’s considering a nonprofit school model, and possibly lowering tuition.

“We will struggle in the future to reduce our tuitions," he said, adding that his school charges different rates per student, depending on their needs. 

They also spent over $24,000 on fringe benefits, for things like apartment rent, a cell phone and utilities for a school administrator who had been living out of state. The company said it’s no longer paying for those benefits.

The recent audit only looked at seven private special education providers, but pointed out that costs at Meliora were, quote "significantly more than the nonprofit providers." They also pointed out that its for-profit model could be part of the problem.

State Board of Education Chairman Allan Taylor agreed.

"If they don't offer something that is different from what others offer, than no, [for-profit schools] shouldn't be used," Taylor said.

There are seven for-profit special education companies in the state that run a total of 15 separate schools. Meliora is by far the most expensive, state data shows. 

Here’s part of the problem -- even the auditors couldn’t determine whether Meliora is actually better than cheaper schools. That’s because there are no outcome measures, like how well students learn at each school.

John Geragosian, auditor of public accounts, said that because there's no system to compare outcomes between the schools, it's hard to know if Meliora’s costs are reasonable or not.

"Of all the schools we looked at, [Meliora's] costs would be possibly questionable," Geragosian said. "We're not saying they are, because there's no measure. There's no allowable cost structure."

Tuition at private special education schools ranges from about $30,000 a year to, in some cases, well over six figures. The state pays a portion only if the cost exceeds a certain threshold, which varies by district.

This system is known as the Excess Cost Grant, and it has a history of problems. Back in 2013, an independent audit found that Darien schools got over $200,000 in state money for special education services it never provided. The General Assembly later established a commission to look at the Excess Cost system, and it pushed legislation that required the state to audit private providers.

The first statewide audit results were released in February, and auditors said the system needs better management. They found there were no contracts between many schools and districts, and record-keeping was all over the place.

In fact, the system is so messy, the potential for fraud is high, Geragosian said.

"We always think if there are not standards in place, there are not clear contracts in place, there are not clear documentation in place, it always increases the risk of fraud," he said.

However, getting a better handle on the operations of all private special education schools could be a challenge. First, there's the question of capacity. Currently, only one person at the state Department of Education handles over 5,000 Excess Cost Grant applications annually.

Then there's the concern of more red tape. 

"You've got to do it without overly bureaucratizing what is already a fairly bureaucracy-heavy -- necessarily so -- system," said Chairman Taylor. "So the audit report identifies things that need to be looked at more, but I don't know what the result of that look ought to be."

A proposal in the General Assembly would require contracts between the private schools and districts for each student.

The state Department of Education has stated it would work to improve its oversight, but cautioned that individual student need, and not cost, should be top priority.