Soaring special education costs are squeezing the budgets of Minnesota schools — and quickly becoming school districts' top priority for the new legislative session.

While public schools are required to provide special education services, federal and state governments cover only a portion of the cost. That means Minnesota districts must dig in their budgets, pull out money they would otherwise spend paying teachers or remodeling aging buildings, and collectively fill in a gap that this year is expected to balloon to $724 million.

For many districts, that exercise has become increasingly painful, resulting in teacher layoffs, program cuts and swelling class sizes. School administrators are quick to note that they cannot — and would not — deny special education students their right to an education that meets their needs, no matter the cost. But they say the mandate's growing financial burden is threatening their ability to provide the same for all students.

"Districts are taking ever-increasing amounts of money out of their general education funds to pay for special education costs," said Brad Lundell, executive director of Schools for Equity in Education, a group that represents nearly 60 districts across the state. "And that, I think, is reaching a crisis level in the state."

Many school administrators and advocates say the problem begins with the federal government, which has never followed through on its decades-old pledge to cover 40 percent of special education costs. Currently, the federal government pays for about 8 percent of Minnesota's $2.2 billion annual special education expenses.

The share of the cost picked up by the state has ticked up in the last decade, rising to about 63 percent this year. But it's not enough: more Minnesota students are requiring special education services, including a growing number with particularly complex medical, mental health or behavioral needs. The cost to serve them is rising at a faster rate than the overall costs of education, and the federal government isn't responding in kind.

Meanwhile, a shift in the way the state distributes special education money to schools has left some districts with a bigger funding gap than they'd had in the past.

That's the case for White Bear Lake Area Schools, which has seen its special education shortfall swell by more than 20 percent over the last five years. Now, the amount of money that it must divert to special education adds up to $10.3 million — the equivalent of more than $1,200 for every student in the district.

"I would say this is probably the No. 1 issue for us from a budgetary standpoint," said superintendent Wayne Kazmierczak. "From a standpoint of what financially keeps us awake at night, it certainly keeps us awake."

In the Columbia Heights school district, administrators have a similar story. Their funding gap — which education officials refer to as a "cross-subsidy," because they pull money out of their general education budget to subsidize special education — amounts to about 10 percent of the district's entire budget. With that amount of money, the district could fund more than 70 teaching positions.

"Because special education is an expensive program to run, that equates out to staff positions, technology, buildings and facilities you compromise to cover those costs," said Bernice Humnick, the district's director of finance and operations.

Districts with higher-than-average rates of students in special education are in a particularly tough spot, because the way the state hands out money isn't tied exclusively to each district's special education enrollment.

Also hit hard: districts with a large number of students who live in the district but open enroll to other public districts or charter schools.

Under state law, schools that serve open-enrolled special education students can bill those students' "home" districts for the cost of transportation, teaching, equipment and everything else that goes into special education services. The home districts have no control over how much the other districts and charter schools spend, and no choice about paying the bill.

Josh Downham, a lobbyist for Minneapolis Public Schools, said the district's annual payout for special education students who don't attend Minneapolis schools now tops $22 million. That number has surged in recent years, particularly in the amount of money billed by charter schools serving Minneapolis students.

Downham said charter school billing has more than doubled in the past four years — a far greater increase than the number of special education students open enrolling to those schools.

The district has other demands for its special education funding, including a larger-than-average number of homeless students for whom it must cover transportation expenses to other districts. It also serves a growing number of students with severe and complicated medical needs, including some whose costs can add up to around $100,000 each year.

All told, Minneapolis has the state's largest special education funding gap: $55.3 million, or about $1,400 for every student in the district.

As the new legislative session begins, Downham said the district is pushing hard for bills that would address the funding gap and the inequities some see in how the state distributes its share.

"It is by far our No. 1 priority at the State Capitol," he said.

It's not yet clear whether state lawmakers will share that priority. Members of both parties have worked in the past to increase the state's contributions and have acknowledged the importance of serving all students. But they don't always share schools' perspective that the state isn't doing enough. During last year's session, DFLers and Republicans clashed over former DFL Gov. Mark Dayton's proposal to dedicate emergency funding to cash-strapped school districts. Some legislative leaders said it was districts' poor financial decisions that created the problem, not state underfunding.

Some in and outside the Capitol argue that Minnesota's schools should be making their case to the federal government, not the state, as well as doing more to right their own financial ships.

"We don't have a K-12 funding issue in this state, if you look at the increases they've received," said Charlie Weaver, executive director of the Minnesota Business Partnership. "What we have is a results issue."

But leaders of some of the state's smaller districts say they're running out of options. In a state that relies heavily on local property taxes and voter-approved levies to keep schools running, districts that lack the property tax wealth of major businesses are at a disadvantage. Many plan to make their case at the Capitol this year and offer ideas they think could help, like a new sales tax dedicated to education.

Paul Durand, superintendent of Rockford Area Schools, northwest of the Twin Cities, said his district has struggled to pass operating levies. It recently succeeded in passing a $750-per-pupil levy, but almost all of that money will be consumed by special education costs. He's backing a one-cent sales tax to benefit schools, but acknowledges that it's unlikely many lawmakers are "jumping up and down" about the idea.

Still, he's hopeful that it might spark more conversation, or another idea about how to ensure Minnesota's schools have enough to provide for all their students.

"We can kick the can down the road, but if we address it today I think it will be better for everybody," he said.

Erin Golden • 612-673-4790