AUSTIN, Texas — Texas will likely have to give up $33.3 million in federal special education funds after the 5th U.S. Circuit Court of Appeals found that the state violated a federal rule.

States are prohibited by federal law from reducing funding for special education services. If states decide to reduce funding, the U.S. Department of Education reduces the amount of federal aid by the same amount. In 2012, Texas reduced its special education budget by $33 million, so the federal government withheld $33 million as a penalty.

The law is designed to prevent states from shifting more of the financial burden of special education to the federal government. Still, Texas fought the Department of Education’s decision to withhold the funding, arguing that the costs of providing special education services had gone down, so it allocated less money that year.

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In a 13-page ruling released this week, a three-judge panel called the state’s argument “unpersuasive,” and questioned the state’s method for allocating special education funding. The federal government has the option to collect the $33 million penalty in one chunk or spread it out over several years. The penalty is about 3 percent of Texas’ annual $1 billion federal special education grant, according to Texas Education Agency officials who said the penalty would have minimal impact on special education programs. The Texas Education Agency declined to comment, and it’s unclear if the state will appeal the ruling. The Texas Attorney General did not immediately return a request for comment.

The ruling comes as the state is overhauling its special education system after the Department of Education determined that state officials illegally set up what amounted to a cap on the number of students receiving special education. While 13 percent of students across the nation are in special education programs, Texas officials pushed school districts to admit no more than 8.5 percent of their students into those programs. A 2016 Houston Chronicle investigation prompted the federal inquiry.

While the ruling is unrelated to the cap, special education advocates say it’s yet another example of the state skirting its obligation to provide special education services to students in need.

“All states must ensure a minimum level of state aid for special education services and Texas is faced with multiple school years in which it fell short,” said Steven Aleman, a policy specialist with Disability Rights Texas. “Texas has to get its priorities straight, fix the broken grant allocation system, and put more resources into special education services.”

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