HB 1563 — relative to the special education aid formula and the administration and monitoring of state special education aid.

CHAPTER 232 HB 1563-FN-LOCAL - VERSIONFINAL ADOPTEDVERSION BY BOTH BODIES 19Feb2026...

CHAPTER 232 HB 1563-FN-LOCAL - VERSIONFINAL ADOPTEDVERSION BY BOTH BODIES 19Feb2026...

1232:1 Legislative Intent.

2232:2 Education;

III.(a) For the fiscal year ending June 30, 2029, based upon school year 2027-2028 costs, and for each fiscal year thereafter, [The] the department of education shall distribute aid available under this paragraph as entitlement to such school districts as have a special education pupil for whose costs they are responsible, for whom the costs of special education in the fiscal year exceed [3] 2 and 1/2 times the most current state average expenditure per pupil for the school year preceding the year of distribution.Ifdistribution. in any year, the amount appropriated for distribution as special education aid in accordance with this section is insufficient therefor, the appropriation shall be prorated proportionally based on entitlement among the districts entitled to a grant, provided that the department of education shall distribute to the school district not less than 80 percent of the district's entitlement in the fiscal year.

If in any year, the amount appropriated for distribution as special education aid in accordance with this section is insufficient therefor, the appropriation shall be prorated proportionally based on entitlement among the districts entitled to a grant, provided that the department of education shall distribute to the school district not less than 80 percent of the district's entitlement in the fiscal year.

HB 1563-FN-LOCAL - VERSION ADOPTED BY BOTH BODIES - Page 2 - [(b) The school district shall be liable for 3 and 1/2 times the estimated state average expenditure per pupil for the school year preceding the year of distribution, plus 20 percent of the additional cost, up to 10 times the estimated state average expenditure per pupil for the school year preceding the year of distribution.] CHAPTER 232 HB 1563-FN-LOCAL - FINAL VERSION - Page 2 - (b) The school district shall be liable for the following amounts, calculated using the most current state average expenditure per pupil for the school year preceding the year of distribution:

3232:3 New Paragraph;

HB 1563-FN-LOCAL - VERSION ADOPTED BY BOTH BODIES - Page 3 - (a) In calculating costs associated with an individual student, the costs shall be incurred solely as a result of the provision of special education and related services to the student’s individual education program pursuant to RSA 186-C:7.

CHAPTER 232 HB 1563-FN-LOCAL - FINAL VERSION - Page 3 - (c) The district shall demonstrate and document that it has fully accessed, to the maximum extent possible, other available revenue sources, including Medicaid and private insurance, or provide documentation as to why other revenue sources were unavailable to the district for special education aid.

(e) A pupil's local education agency (LEA) shall provide documentation on the specific costs being claimed for each student.studentIf there are questions about an LEA's claim and its costs are not documented, the claim may be disqualified.

If there are questions about an LEA's claim and its costs are not documented, the claim may be disqualified.

All services included in the claim shall be specified in the IEP, and tied to the child's disability-relateddisability- related needs and programs.

4232:4 New Section;

HB 1563-FN-LOCAL - VERSION ADOPTED BY BOTH BODIES - Page 4 - III.

CHAPTER 232 HB 1563-FN-LOCAL - FINAL VERSION - Page 4 - (c) If systemic errors are identified, the department may take additional measures, including:

5232:5 Effective Date.

LBAApproved: 26-2408 04/10/2026 HB 1563-FN-LOCAL- FISCAL NOTE AS AMENDED BY THE HOUSE (AMENDMENT #2026-1086h) AN ACT relative to the special education aid formula and the administration and monitoring of state special education aid.

FISCALJuly IMPACT:02, 2026 Effective Date:

ThisJuly bill01, does2028 not provide funding, nor does it authorize new positions.

Estimated State Impact FY 2026 FY 2027 FY 2028 FY 2029 Revenue $0 $0 $0 $0 Revenue Fund(s) None Indeterminable Expenditures* $0 $0 $0 Increase ($5M+) Funding Source(s) General Fund and Education Trust Fund Statutory Open Warrant Exists Appropriations* $0 $0 $0 to Make Required Special Education Aid Payments Funding Source(s) Education Trust Fund *Expenditure = Cost of bill *Appropriation = Authorized funding to cover cost of bill Estimated Political Subdivision Impact FY 2026 FY 2027 FY 2028 FY 2029 Indeterminable Local Revenue $0 $0 $0 Increase ($5M+) Local Expenditures $0 $0 $0 $0 METHODOLOGY:

The bill, effective July 1, 2028 (FY 2029 payment based upon 2027-2028 school year costs), revises the aid formula for higher cost special education students by lowering the eligibility threshold and restructuring cost sharing between the state and school districts.

This bill also establishes a new certified reporting and risk-based monitoring system to improve oversight of reimbursements.

Below is a summary of the cost sharing changes proposed by this bill:

  Current Law Proposed Local State Local State Share Share Share Share Less than 2.5X 100% 0% 100% 0% 2.5X - 3.5X 100% 0% 85% 15% 3.5X - 10X 20% 80% 20% 80% More Than 10X 0% 100% 10% 90% X = Times the most current state average expenditure per pupil for the school year preceding the year of distribution Under current law, and unchanged by this bill, if annual appropriations for this aid program are insufficient, funds shall be prorated among eligible districts, with each district receiving no less than 80 percent of its entitlement.

In FY 2026, there were $54.769M in eligible costs, with a $49.917M state appropriation, resulting in a proration of 91.14%.

Ultimately, this bill’s impact on state expenditures and local school district revenue in FY 2029 and beyond is indeterminable, as district reimbursable costs and future state appropriation amounts are not yet known.

However, the Department of Education has provided the following information in estimating this bill’s potential impact:

 Recent special education aid submissions can be used to estimate changes at both the state and district levels.

Under current law, only students with costs exceeding 3.5 times the average cost per pupil (ACPP) qualify for aid ($75,320 in 2024–2025, paid in FY 2026).

The proposal lowers this threshold to 2.5 times ACPP ($53,800).

 As Department does not collect data on students below the current 3.5X threshold, this analysis is limited to currently eligible students and excludes any additional students who would qualify under the lower threshold.

 Under this bill, costs between 2.5x and 3.5x ACPP would be reimbursed at 15 percent (currently unreimbursed).

Applying this to recent data, 798 students would receive additional aid, increasing total district entitlement by $2,575,933 (about $3,228 per student).

 For students above 10x ACPP, reimbursement would decrease from 100 percent to 90 percent.

As a result, some districts would see reduced aid, and once costs exceed $247,479, districts would begin absorbing costs currently fully covered by the state.

In 2024–2025 data, 64 students across 45 districts fall into this category, resulting in estimated state savings of $708,528 and increased district costs ranging from $459 to $49,000 per student.

 The number and cost of additional students who would qualify under the 2.5x threshold remain unknown.

To estimate this, statistical modeling was applied using district-level data on special education populations, aid eligibility, and high-cost thresholds.

Since data below 3.5x ACPP is not currently available, the Department validated the model through back-testing against known high-cost student counts/expenditures and compared with a Pareto-based estimation approach.