Association for Public Policy Analysis & Management

Understanding the effects of Special Education (SE) classification on SE and General Education students is crucial given the rising participation rates and cost of SE in recent years. SE students now make up roughly 13 percent of the school population, and account for the fourth largest category of federal education spending at about $13 billion. However, it is extremely difficult to estimate the causal effects of SE placement on student outcomes. Students are selected into SE based on need and ability, and SE services are a legal entitlement for qualifying students with disabilities under the Individuals with Disabilities Education Act (IDEA). It is difficult, therefore, to find an environment in which there is exogenous variation in access to SE. In this paper, we utilize a unique source of exogenous variation in SE enrollment among minority students to isolate the impacts of reduced access to SE on short- and long-run outcomes. In 2004-2005, the Texas Education Agency (TEA) introduced the Performance Based Monitoring Analysis System (PBMAS), which implemented a cap on SE enrollment for all students at 8.5 percent at the district level, along with caps on Black and Hispanic student disproportionality in SE. These disproportionality targets determined that districts could have no more than 1 percentage point greater enrollment among Black or Hispanic students in SE, relative to the percent of Black or Hispanic students in a district overall. We implement a difference-in-differences empirical strategy, which utilizes cross-district and cross-cohort variation to estimate the impact of these two targets on Black and Hispanic students in Special and General Education in the short- and long-run. Our outcomes include SE enrollment, performance on math and reading state standardized exams, high school graduation, college enrollment, college completion, and earnings in the labor market. In order to estimate outcomes in the short- and long-run, we utilize restricted-access administrative data from the Texas Schools Project that allows us to link the universe of public K-12 students to post-secondary schools in Texas, and to earnings in the Texas labor force.