Ohio school districts had a 25.57% reimbursement rate for their most expensive special education cases this year, and two state lawmakers want to address the funding with a $360 million fund and the end of a withholding. House Bill 1012, introduced in September, would eliminate a 10% state withholding on special education funding for traditional public and joint vocational school districts starting in fiscal 2027, while setting aside new dedicated money to cover high-cost student claims.
The bill, introduced September 17 by Republican state Representatives Andrea White of Kettering and Cindy Abrams of Harrison, would retain Ohio's existing reimbursement formula under Ohio Revised Code Section 3317.0214 but strip out the withholding provisions for traditional and joint vocational districts starting in fiscal 2027, according to Cleveland.com. Community schools and STEM schools would still contribute 5% of specified special education funding under the bill, and unused contributions from those schools can still be redistributed among them under existing law. For fiscal 2026, the current funding arrangement stays in place.
Here's how the withholding currently works: the Ohio Department of Education and Workforce calculates a 10% deduction from a traditional or joint vocational district's qualifying special education funding after formula adjustments. On $2 million in qualifying funding, a district would see $200,000 withheld. Districts can then apply for reimbursement once an eligible student's service costs exceed set thresholds — $27,375 for categories two through five, and $32,850 for category six — with the state calculating payouts based on costs above those thresholds and each district's state-share percentage.
A Quarter of Claims Paid Out
The problem, per state figures cited via the Ohio Capital Journal, is that the pool doesn't have enough money to go around. Ohio school districts received just $90.9 million in reimbursements in fiscal 2026, spread across 535 districts and 22,158 approved student applications — a statewide reimbursement rate of only 25.57%. How much any individual district actually receives depends on how much total funding is available once all claims are tallied, and HB 1012 would not change that underlying dynamic for the amount each district ultimately gets.
White and Abrams said in a September statement that their proposal would require the state to cover the full additional cost once a student's expenses exceed the applicable threshold.
Federal Dollars Fall Well Short
Part of the pressure traces back to Washington. Federal IDEA grants fall short of the 40% share Congress originally committed to decades ago — even though IDEA still requires public schools to provide a free appropriate public education regardless of how much state or federal funding actually arrives.
Demand keeps climbing on top of that gap. Ohio students with disabilities made up 17.3% of the state's preschool and school-age enrollment during the 2024-25 school year, per Cleveland.com's reporting, and the trend has been building for years: the share of Ohio public school students receiving special education services rose from 16.2% in the 2021-22 school year to 17.7% in 2025-26, according to the Hilliard Herald.
One Suburban District's Numbers
Hilliard City Schools offers a snapshot of what that growth looks like at the local level. The district budgeted $31.85 million for special education in fiscal 2026, a 9.8% jump from the prior year that now accounts for 12.3% of its general fund, the Hilliard Herald reported. Hilliard added three intervention specialist teachers and five assistant positions for the 2025-26 school year just to keep pace with growing caseloads.
The withholding system HB 1012 targets isn't new — it dates to a 2023 rebranding. Ohio renamed its old “catastrophic cost aid” program to “threshold cost reimbursements” under House Bill 33 that year, according to Ennis Britton Co. L.P.A..
Budget Context and Open Questions
The $360 million HB 1012 would appropriate for fiscal 2027 would land inside a state education budget already under scrutiny. Public education funding still fell $2.75 billion short of full funding under the state's Fair School Funding Plan model, according to Policy Matters Ohio.
It's unclear whether the proposed $360 million would act as a hard spending cap or guarantee full cost coverage if total district claims exceed that figure, and the bill text reviewed by Cleveland.com does not resolve how much any single district will ultimately receive under the new structure. HB 1012 remains introduced but not yet enacted as of October 16.
How It Compares to Private Options
The reimbursement fight unfolds alongside separate state funding streams for families who opt out of public districts altogether. Ohio also has an Autism Scholarship Program. Whether lawmakers weigh that program against the threshold reimbursement shortfall as HB 1012 moves through committee remains to be seen.
