In an effort to combat fraud, the New York State Education Department yesterday adopted a new rule that will change how special education funding is distributed for services to students who attend New York City’s non-public schools, including yeshivas.

The change comes after a 2022 New York Times report that found New York City was paying over $350 million a year “to private companies that provide services in Hasidic and Orthodox schools.” Since proposing the change in May, NYSED officials have worked to allay fears that the rule would not just punish fraudsters, but also make it harder for people who genuinely need special services to access them.

At their meeting on Monday, NYSED’s governing body, the Board of Regents, adopted the change as an emergency rule which will go into immediate effect before the start of the school year.

Under federal law, each school district receives funding for special education and must give an “equitable portion” of this funding to private school students who need special services. The district must also make a plan for each of these students, called an IESP, that describes what services the student needs.

If private school students don’t get those services from the school district, their parents can request administrative “due process” hearings to ask the district to reimburse them for the cost of obtaining those services elsewhere. NYSED’s new rule will limit that hearing process, eliminating it for cases where parents want to be reimbursed at a higher rate than the rate set by the city. The hearing process will still exist for other situations.

The rule targets a special education service called “special education teacher support services,” known as SETSS, which is similar to tutoring and only offered in New York City. According to the 2022 Times report, about 80% of requests for such services came from Orthodox districts in the prior year. The service, which is often one-to-one and takes place outside the classroom, is ill-defined and thus vulnerable to fraud, according to the Times.

The city is willing to pay up to $125 per hour for this service, but many tutors charge more than that, forcing parents who want to hire them to go through the complaint process that NYSED now seeks to limit.

According to Lloyd Donders, a lawyer who represents parents in such cases, the standard rate for the service is $42, but since “you can’t actually get someone at that rate,” the city has an “enhanced” rate of $125. “I don’t think the DOE puts up a fight unless you ask them for more than $125,” Donders told Shtetl.

At a public meeting on Monday, NYSED Commissioner Betty Rosa said too many people are profiting from rates that go far beyond $125 an hour.

“We are stewards for our taxpayers, and it is very very challenging to think that if you have a provider, that instead of getting $125 an hour, or $200, is asking for $400 an hour.” Rosa said it’s NYSED’s job to ensure “that we don’t have a situation, as we know we have, where there’s a whole business attached to some of this process.” She added that lawyers and even real estate businesspeople have benefited from the program.

According to a recent report from New York City Comptroller Brad Lander, the city spent $372 million on due process claims for educational services such as SETSS in fiscal year 2022, a much higher number than in any prior year and a ten-fold increase from the $33 million figure in 2012.

At least two Haredi organizations, Agudath Israel of America and the United Jewish Organizations of Williamsburg and North Brooklyn, opposed the proposed amendment, according to articles in Haredi news media.

Leaders at Agudah told the magazine Mishpacha they were working with Catholic school advocates to prevent the amendment from being adopted. “Children with special needs are our communities’ most vulnerable population,” Agudah activist Avrohom Weinstock told the magazine, which published the article in early June. “They must have every avenue open to ensure they receive the services they need to thrive.”

The UJO, too, has been “working tirelessly to stop the amendment,” according to an article published in the Yiddish-language Hasidic newspaper Der Yid in early July. “In recent weeks, the UJO has conferenced with education officials, advocates, experts, and various Jewish and non-Jewish organizations to fight the new proposal and has participated in tens of meetings with the state and city officials over this issue.”

Addressing these concerns, regents said on Monday that the New York City Department of Education would provide guidance about how the amendment would affect children, and outline steps to ensure children still get the services they need. The DOE created an “enhanced rate equitable services unit” that will process all requests for enhanced rates. 

NYSED also clarified the types of hearings that would be eliminated by the change. The change would specifically target “disputes over whether a rate charged by a licensed provider is consistent with the program in a student's IESP or aligned with the current market rate for such services.”

The Times’ 2022 report found that some Haredi schools pressured parents to have their children diagnosed with disabilities, which can be used to bill the government for services. Requests for reimbursement boomed in 2014 and appeared to have tripled by 2022, with most of the increase coming from districts with heavily Orthodox neighborhoods, according to the Times.

In 2023, Martin Handler, an executive who ran several special education agencies that served Haredi students, was arrested and charged with stealing millions of dollars intended for special education. Handler has since pleaded guilty to some of the charges against him as part of a plea deal with the government.

In a memo to colleagues explaining the new rule, Angelique Johnson Dingle, a deputy commissioner at NYSED, didn’t mention yeshivas or the Times report, but said the agency has noticed possible fraud. “A review of recent hearing transcripts from the past year has revealed instances of questionable practices,” Johnson Dingle wrote. 

She gave examples: a provider who asked the government to reimburse it for $250 per hour even though it only charged $120 per hour, a parent who asked the government to reimburse them for services they had no evidence of having received, and a school that recently raised the cost of a student’s attendance from $150,000 to $425,000 for a single school year.

Previously, the change was meant to be adopted in September, after the public comment period closed on July 22, but regents said an emergency adoption was necessary to provide “predictability” in the upcoming school year.

The emergency action will expire in September, at which point NYSED will consider adopting the rule again on an emergency basis. In November, NYSED will consider adopting the rule permanently.