New York State’s attempt to crack down on overpriced reimbursements for private school students' special education services has stalled after a judge granted a temporary restraining order pausing the implementation of the state’s newly adopted rules after Agudath Israel of America brought a lawsuit claiming that the state’s new rule was illegal and harming children.

In an email to supporters on Sunday, the Haredi organization Agudah celebrated Judge Kimberly A. O’Connor’s decision to temporarily stall the program while Agudah’s case is heard, calling the court order “a significant victory for children with special needs in New York and a blow to the New York State Education Department.”

The new regulation, passed by NYSED in July, will be suspended until at least January 10, 2025, when the next hearing is scheduled.

Under federal law, school districts must fund special education services for private school students, but details of funding are left up to districts. The purpose of NYSED’s policy change, which was announced in the spring and went into effect this summer, was to combat fraud after a report from the New York Times found that some Haredi schools pressured parents to have their children diagnosed with disabilities, which can be used to bill the government for services. According to that report, New York City was paying over $350 million a year to private companies that provide services in Orthodox schools, a tenfold increase between 2012 and 2022.

In order to combat fraud, the state sought to remove parents’ ability to request administrative “due process” hearings to ask the district to reimburse them for services that parents obtained for higher than the rate that the New York City Department of Education is willing to pay. 

The most commonly requested of these services is Special Education Teacher Support Services, or SETSS, which is similar to tutoring and only offered in New York City. SETSS is ill-defined and thus vulnerable to fraud, according to the Times.

Until recently, the standard rate for SETSS was $42 an hour, according to lawyer Lloyd Donders, who represents parents against the city. But, Donders said, since “you can’t actually get someone at that rate,” the city has offered an “enhanced” rate of up to $125.

After NYSED announced the policy change in the summer, the DOE increased the standard rate for the service to about $86 an hour, according to information on its website. Parents can still get enhanced rates in some situations by going through the Enhanced Rate Equitable Services Unit, a new unit in the DOE introduced in tandem with the policy change.

Agudah claims the change was announced with too short notice, the new standard rate is still too low, the ERES Unit is ineffective, and that some providers of this service have closed down since the policy was announced because they can no longer afford to do business. As part of the lawsuit, Agudah submitted affirmations from 10 different parents who all say their children have been harmed by the new policy.

None of the parents who submitted affirmations appeared to mention going to the ERES Unit. In an email to Shtetl, NYC DOE spokesperson Nicole Brownstein denied that the new unit was ineffective and said it has so far received very few requests from families about enhanced rates for services and still has weeks left to respond to any inquiries within the DOE’s time frame.

“Since filings opened on September 1, 2024, NYC Public Schools’ ERES Unit has received fewer than 400 requests from families,” Brownstein said. “ERES also has 60 days from the date the request is filed to respond – as of today, October 2, 2024, it has only been 31 days.”

In an email to Shtetl, NYSED offered a potential explanation for why some providers have closed up shop rather than utilizing the ERES Unit. “Some providers may be unwilling to utilize the process if they are unable or unwilling to produce proof of current licensure, records detailing services provided, etc.,” wrote NYSED spokesperson JP O’Hare.

Providing services without licenses and billing without records detailing services could constitute fraud. In his 2023 analysis of New York City’s special education services, “Course Correction,” comptroller Brad Lander noted that “For over 90% of the more than 900 special education service providers paid by DOE in FY22 as the result of due process claims, there appears to be no safety clearance, accreditation check, or responsibility determination prior to payment.”

In their filing, lawyers for Agudah acknowledged the desire to prevent fraud. “Even if waste or fraud were serious concerns in a small number of cases, the Revised Regulation is a massively overbroad reaction that deprives thousands of law-abiding families of their legal rights, and harms thousands of innocent children,” they wrote, referring to the new rule.

In the affirmations Agudah submitted, parents described how their children’s care has changed since NYSED’s policy was announced this summer. None of the parents are named in the lawsuit, for fear that their children will be recognized, but initials are given for the parents and children.

One parent said their 12-year-old daughter needs SETSS because “her reading is currently at a fourth-grade level, which she has gotten to with significant support.” In the past, this parent says, the city reimbursed the tutor’s price of $200 per hour.

“I spoke with the individual provider who gave my daughter SETSS services last year and I asked if she would remain on,” the parent said in the affirmation. “She told me that she cannot continue to work with my daughter because the DOE’s rates are too low.”

Now, this parent said, without SETSS, the girl’s “first test scores in the 2024-2025 school year have dropped to 70%.”

Other children need services other than SETSS, such as occupational therapy, speech therapy, physical therapy, and vision education services. Some parents said that because of NYSED’s policy change, these other services, which are believed to be less vulnerable to fraud, are also being affected.

One parent said that the new policy has harmed their 17-year-old son, who “is severely autistic and has lingering effects from lead poisoning from when he was younger.” The teenager is supposed to be receiving SETSS, physical therapy, and counseling, but he’s losing out on all of them.

“He is only consistently receiving speech therapy and OT right now,” the parent said. “He needs this critical support and he is losing out on necessary development that he will need in order to live as an autistic and disabled adult,” the parent said.

A parent of a blind girl submitted a similar affirmation. “The counseling provider and vision education services provider that serviced my daughter for the 23-24 school year do not want to service my daughter again for the 24-25 school year because of all the uncertainty that has ensued by the New Regulation,” the parent said.

Attorneys working with Agudah, Adam P. Cohen and Ivy Yao of the firm Walden Macht Haran & Williams, did not respond to questions from Shtetl.