Why are Minnesota special ed and long-term care costs rising so fast?

The number of Minnesotans seeking special education and long-term care services is growing fast, and the assistance they receive is increasingly expensive.

State budget officials recently highlighted those services for people with disabilities as the biggest drivers of state spending, contributing to a potential deficit in a few years. But experts in those fields say the rising demand and expense is not surprising, and the state should have been prepared. And, many said, legislators should be ready for the trend to continue.

“Twelve years ago, [the state demographer] warned of a seismic shift — that Minnesotans 65 and older would soon outnumber the K-12 population,” said Senate Human Services Committee Chairman John Hoffman, DFL-Champlin. “Yet, instead of proactive measures to address the shift, everybody in the state largely kept the status quo.

“Now they’re blaming elderly and special education,’' he added. “These groups deserve support instead of scapegoating.”

The most recent budget forecast predicted Minnesota would have a $616 million surplus in the upcoming two-year budget and a $5.1 billion deficit the following two years. A multitude of factors, like slower employment and wage growth, contribute to that outlook. But when it comes to the state spending piece of the puzzle, education and human services make up the bulk of the state’s roughly $71 billion budget.

Special education is the fastest-growing portion of state education spending, for a variety of reasons, including increased demand. There were about 148,000 students getting special education services in 2019, State Budget Director Ahna Minge said, and that’s projected to reach almost 200,000 by 2029.

In human services, there has been a steady rise over the past decade in the number of people using disability waivers for long-term care that helps them continue to live in their communities. The average monthly cost for those waiver services has climbed by about $3,000 over the past decade.

The Minnesota Star Tribune spoke to special education and long-term care experts and lawmakers about what’s behind the growing need and costs, what other states are seeing and what changes might be considered at the State Capitol.

The numbers are sobering, even if the people who work with or advocate for elderly and disabled Minnesotans aren’t surprised. And it’s a national trend, said Jesse Slome, director of the American Association for Long-Term Care Insurance.

“First of all, this is not new,” he said, noting that demographers say the oldest baby boomers will start turning 85 – a key age threshold in terms of needing long-term care – in 2031. “Whether it’s individuals or politicians, they are all very skilled at kicking the can down the road. And we don’t address things until it’s a crisis.”

Yet, with only about 8 million people paying for long-term care insurance — and there are 76 million baby boomers nationwide — taxpayers will likely have to pay for much of it, he said. Some ideas include public/private partnerships that split those costs between states and insurers, Slome said, such as a program in Washington state that collects part of employees’ pay to apply later to long-term care costs. Still, he said, real action by elected officials has been lacking.

Minnesota is seeing substantial growth in Medicaid home and community-based service waivers for adults 65 or older, as well as an increase in children receiving the disability waivers, Department of Human Services officials said. In particular, more people are seeking services that help them stay in their homes rather than go to an institutional setting. And people with more complex needs are having to pay more for direct care workers who have adequate experience and expertise, so counties, which administer waiver programs, are seeing more expensive requests that exceed the state’s set service rates.

DHS officials added that many waivers have built-in inflationary increases for workers. That helps maintain and build the industry’s workforce, but also increases costs.

LeadingAge Minnesota CEO Kari Thurlow said, with one in four Minnesotans being 65 or older by 2030, “the demand for long-term care showing up in our budget documents should not be surprising to anyone.”

When it comes to rising costs for seniors and disabled residents, Thurlow said lawmakers need to be careful how they address the issue.

“We’re talking about certain services and supports that they are entitled to under the law,” she said.

Like Hoffman, she said that tagging certain groups of people as being responsible for impending deficits is “unhelpful” and might lead to harmful and unfair cuts – such as continuing to underfund nursing homes. Most spending for long-term care goes to salaries and benefits. Cutting those costs likely means cutting the salaries of those tasked with hands-on care of loved ones, she said.

“We seem to be more interested in [tracking] changes forecast to forecast… rather than looking at long-range solutions,” Thurlow said.

State Rep. Joe Schomacker, R-Luverne, agreed that thoughtful examination of what is driving cost increases is needed along with creative solutions. He said he needs to study the issue more carefully.

One idea, he said, is to get people into the “right type of care” sooner before costs climb higher.

“That is going to save us over the long run,” Schomacker said. “Rather than let something go and in the long run become much more difficult.”

State spending on special education has more than doubled over the past decade to $4.9 billion in the current budget, according to forecast documents. That’s predicted to grow to $6.6 billion in the 2028-2029 budget.

“None of this was a surprise at all to anybody who works in education,” said Scott Croonquist, executive director of the Association of Metropolitan School Districts. “It’s something they have been working on and dealing with for many, many years.”

Along with rising demand and higher projected staffing and transportation costs, education officials noted lawmakers made a major change last year that contributes to higher state costs. Special education expenses have long fallen largely on local school districts. Congress provides around 14% of the money needed to educate children with disabilities, far less than the 40% it promised decades ago. Minnesota was paying around 6%, but last year Democrats boosted that to 44% and will raise it to 50% in fiscal year 2027.

The state also devoted more money last year to kids’ social-emotional and academic needs, said DFL Rep. Cheryl Youakim, co-chair of the House Education Finance Committee next year. She said the early interventions could reduce kids’ need for more intensive services later and help them participate in traditional classrooms.

“Trying to figure out how to meet our kids needs early and get them on that path to success is the best way we can head after some cost savings,” she said.

Lawmakers this session will talk to parents, teachers and others about whether they are identifying too many students as needing special education services and if some kids could use less-intensive support, she said. There’s a “mismatch” where some kids get more services than they need, said GOP Rep. Ron Kresha, who will be Youakim’s co-chair in the evenly divided House.

“There’s always going to be this tendency to [say], ‘Hey, let’s get as much services to this kid as we can because we want them to succeed.’ I think that’s a noble quest, but what are we taking away from other students who may have needs that we may not be addressing?” Kresha said, noting that some services may have to be rolled back in light of the potential deficit.

Nationally, special education officials are wary of President-elect Donald Trump’s proposal to eliminate the Department of Education, said Phyllis Wolfram, executive director of the national Council of Administrators of Special Education. Minnesota isn’t alone in its rising costs and demand for services, she said, adding that providers are grappling with challenging behaviors and mental health needs, including for younger children.

“We’re still seeing needs and challenges for students that are coming from a post-COVID era, and they don’t just diminish in one or two years,” Wolfram said.

Meanwhile, there is a shortage of special education staff and schools must rely on more expensive contract workers, said Niceta Thomas, president of Minnesota Administrators for Special Education. She said more families are moving to Minnesota with children who require special education and students’ needs are more severe.

“No matter what ability they come from, all children deserve a free and appropriate education,” Thomas said. “We need to make sure we’re meeting that.”