On June 29, 2023, the New York State Education Department (SED) issued the 2023–24 tuition rate-setting methodology letters for both School-Age and Preschool providers serving students with disabilities. While there are some positive aspects in the letters, special education providers will continue to face challenges in the upcoming school year. The following summarizes the significant items in the updated tuition rate methodology:
Trend Factor
The annual trend factor for both School-Age and Preschool is 6.25%, lower than the proposed 9.84% trend factor recommended by SED to the New York State Division of Budget (DOB), as well as lower than the percentage increases in general School Aid of 10% and Foundation Aid of 12.8% per the New York State Budget summary. Although this is the second highest trend factor the special education industry has seen in the past 15 years (11% trend factor in 2022–23), without comparable trend factors to other education departments in New York State, the wage parity gap between special education providers and other sectors of the New York State education system will continue to widen. For special education providers, this presents a continuous challenge to recruit and retain teaching and clinical staff and makes it difficult to meet the needs of the student population they serve.
Non-Direct Care Cost Parameter
One of the more positive updates in the 2023–24 methodology is the change of the non-direct care cost parameter from 30/70 (0.4286) to 35/65 (0.5385). This is more than a 10% change between direct care costs and non-direct costs split. During the pandemic years, schools incurred non-direct screen losses due to staffing shortages of direct care staff while having the limited ability to reduce non-direct costs such as rent expense. The situation continues post-pandemic, with staff shortage becoming a constant topic in the industry calls and one of the main reasons of increases of dark classrooms, which result in a decrease on direct care costs. The change of the non-direct care cost parameter should alleviate some of SED providers’ non-direct care cost issues and possibly help reduce the bottleneck of non-direct care screen loss waiver requests to be filed with SED.
Enrollment Adjustment Factor (EAF)
There are items in the 2023–24 methodology letter that remain the same compared to 2022–23. One item to note is the EAF. To qualify for the EAF, providers need to have enrollment-to-capacity percent decrease by more than 7.5% compared to the average enrollment-to-capacity percent of 2016–17 through 2018–19. SED proposed to reduce the EAF from 7.5% to 5% in its recommendation letter, which would benefit more providers that may incur significant decreases in enrollment coupled with a total cost screen loss, but its recommendation was not incorporated in the final 2023–24 methodology letter.
Surplus Retainage
Like in 2022–23, the 2023–24 methodology letter again includes a provision to allow providers to retain up to an 11% annual surplus for 2023–24.
Interim Rates
Providers’ 2023–24 interim rates are available on the SED’s rate-setting unit website. The interim rates are intended to provide cash flow until the provider’s 2023–24 prospective tuition rates are issued. The interim rates are usually based on the latest published rate with the current year trend factor. However, providers whose prior years’ reconciled tuition rates and/or CFRs are not current may not have their interim rates or expect a decrease in their interim rates. When comparing the 2023–24 interim rates to the 2022–23 interim rates (list downloaded on July 2, 2023), we noted at least 79 providers operating a total of 144 School-Age and Preschool special education programs are having a decrease in their interim rate, indicating a decrease in cash flow for these providers for the upcoming school year.
Below is a five-year comparison of key factors from the rate methodology letters.
| 2019–20 | 2020–21 | 2021–22 | 2022–23 | 2023–24 | |
|---|---|---|---|---|---|
| Trend factor | 3.6% School-Age 2% Preschool | 0% | 4% | 11% | 6.25% |
| Surpluses retainage max % | N/A | N/A | N/A | 11% | 11% |
| Non-direct care cost parameter | 30/70 | 30/70 | 30/70 | 30/70 | 35/65 |
| % of decrease on enrollment-to-capacity to qualify for enrollment adjustment factor (compared to 16-17, 17-18, and 18-19 average) | 10% School-Age only | 5.0% | 7.50% | 7.50% | 7.50% |
In consideration of the 2023–24 tuition rate methodology, here are some recommended action items for special education School-Age and Preschool providers:
- Evaluate if your interim tuition rate(s) are current and with all applicable trend factors. If not, follow up with your assigned SED program accountant on the status of any outstanding prior year(s) tuition rate reconciliation(s) and/or any outstanding tuition waivers filed to get your tuition rate current.
- Perform projected tuition rate calculations for any unreconciled CFR years to project the effect on the upcoming year’s tuition.
- Adjust annual operating budgets for School-Age and Preschool center-based programs that are in place based on the new trend factor.
- Monitor program expenses during the year and perform tuition rate calculations to help ensure rate maximization.
- Discuss with program stakeholders and strategize on the usage of any projected surpluses if applicable.
If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.