Texas' new special education funding system brings more reporting and questions for educators

Texas schools are beginning the first year of a major change in how special education is funded. Under House Bill (HB) 2, passed by the Legislature in 2025, districts have to document the intensity of services each student receives rather than relying primarily on the classroom setting where those services are provided. Special education is one of the most underfunded portions of the school finance system; schools were short $1.8 billion in 2025-2026.

The goal is to direct funding toward students' individual needs, a change Texas AFT supported, but the transition also brings new reporting requirements, uncertainty about district funding, and questions about how the changes will affect special education teachers already managing demanding workloads.

At the center of the transition is the Public Education Information Management System (PEIMS), the statewide reporting system that districts use to submit information about students, staffing, attendance, finances and academic programs to the TEA. The state uses that information to calculate funding, monitor compliance, and produce accountability reports. The fall reporting, generally referred to as “snapshot,” is due to TEA next Friday.

For special education teachers and administrators, the information districts enter into PEIMS is becoming even more consequential.

A new way to calculate special education funding

Previously, Texas largely funded special education according to instructional arrangements, including how much time a student spent receiving services in particular educational settings. Under HB 2's new funding framework, districts instead classify students using eight tiers based on the intensity of services they require, along with additional funding categories called service groups. Those classifications draw from students' individualized education programs (IEPs), which document the services and support schools must provide.

The legislature directed TEA to develop a system that would distribute approximately $250 million more statewide than the previous formula. HB 2 also provides $1,000 for each completed initial special education evaluation (these can cost the district up to $5,000), creating a separate funding mechanism for an area where districts have struggled with backlogs.

The Texas Council of Administrators of Special Education (TCASE), which represents special education administrators, noted during the legislative implementation process that the additional $250 million didn’t yet come with a clear picture of how much individual districts would receive. The previous funding mechanism based solely on placement made forecasting this amount difficult.

According to TEA's implementation guidance, districts must report special education participation using both the old instructional arrangement codes and the new intensity-based classifications during this transition year. The reporting process itself requires districts to examine students' IEPs and determine which services qualify under the new categories. TEA has published a special education funding tool and implementation resources to help administrators complete that work.

Final funding amounts under the new model won't be determined until the state reconciles the data in June 2027. TEA has established a temporary protection preventing districts from receiving less than they would have under the previous formula, but that guarantee applies only to the transition year.

What educators are experiencing

During our statewide listening tour, special education teachers are among the educators whose experiences deserve particular attention during this transition. Their work already involves coordinating services, documenting student progress, communicating with families, and ensuring students receive the support required by their IEPs.

The new funding system adds another layer of documentation and classification, even as districts await clarity about their final funding allocations.

Some teachers reported to state staff that they were being required to assess students’ new tier of services despite not having the appropriate training to do so or being provided additional time or compensation for this important task. They also reported that they were bring coached to err on the side of a lower tier for fear the state would claw back funding if TEA later determined that the tiers were incorrectly assigned.

Those experiences will be important in assessing whether the new model directs additional resources into classrooms or creates more administrative work without enough staffing to support it.

Funding, accountability, and state intervention

The stakes extend beyond district budgets and student services. Special education compliance can also bring districts under increased state oversight, even when the concerns aren't primarily about overall academic performance.

Austin ISD provides a recent example. In March 2023, TEA announced plans to appoint conservators following serious concerns about delayed special education evaluations. After negotiations, the district instead agreed to state monitoring in September 2023. Austin retained its elected school board and superintendent, but TEA-appointed monitors gained a role in overseeing improvements. AISD’s experience demonstrates how special education deficiencies can become grounds for significant state involvement in local district operations. Now, of course, the entire future of the district is under threat.

Meanwhile, the state's new private school voucher program has exposed a different problem for students with disabilities. An investigation by The Dallas Morning News, republished by NBC DFW, found that thousands of students with disabilities returned voucher funding after families struggled to find private schools willing or able to serve them.

Public schools remain responsible for serving students with disabilities, meeting federal special education requirements and documenting those services for the state, even as public dollars support a private school system with zero special education obligations. That contrast raises an important question about Texas' education priorities for some of its most vulnerable students.

HB 2's new special education funding model may better recognize the actual services students need, but whether it delivers enough funding, training and staffing to provide those services is something Texas educators and families will be watching closely.