(Updated: June 24, 2011 at 10:34 PM CST)

South Carolina officials cut millions from the state’s special education budget over the last two years without federal approval. Now, they must restore the money or risk losing significant funding from Washington.

Under federal law, states cannot decrease funding for special education from one year to the next. But in cases of “exceptional or uncontrollable circumstances” the U.S. Department of Education can grant one-year waivers.

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South Carolina is one of seven states that requested waivers in recent years on the heels of the financial crisis, citing budget shortfalls. A 2009 waiver request from the state was approved and a request last year was partially successful.

Now, however, federal officials are saying enough is enough. In a recent letter to South Carolina leaders, the U.S. Department of Education denied a request to cut spending on students with disabilities this year by more than $75 million.

“In short, the state has offered no fiscal or practical reason why the state did not — and could not now — make available an additional $75,343,070 for special education,” wrote Alexa Posny, assistant secretary for special education and rehabilitative services at the Education Department.

What’s more, Posny said South Carolina must restore $111.5 million that was cut over the last two years while waivers were under consideration or risk losing just as much in federal funding.

Iowa is facing a similar situation. In a separate letter this week, Posny denied that state’s waiver request to cut $4 million for 2011 and said no to an amended request from 2010 through which Iowa officials sought to trim spending by $1.5 million.

Earlier this year, Posny turned down a request from Oregon, while approving waivers for Alabama and New Jersey.