[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)]
[Rules and Regulations]
[Pages 31306-31318]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14374]



[[Page 31305]]

Vol. 83

Tuesday,

No. 128

July 3, 2018

Part IV





 Department of Education





-----------------------------------------------------------------------





34 CFR Part 300





 Assistance to States for the Education of Children With Disabilities; 
Preschool Grants for Children With Disabilities; Final Rule

Federal Register / Vol. 83 , No. 128 / Tuesday, July 3, 2018 / Rules 
and Regulations

[[Page 31306]]


-----------------------------------------------------------------------

DEPARTMENT OF EDUCATION

34 CFR Part 300

RIN 1820-AB77
[Docket ID ED-2017-OSERS-0128]


Assistance to States for the Education of Children With 
Disabilities; Preschool Grants for Children With Disabilities

AGENCY: Office of Special Education and Rehabilitative Services, 
Department of Education.

ACTION: Final rule; delay of compliance date.

-----------------------------------------------------------------------

SUMMARY: The Department postpones by two years the date for States to 
comply with the ``Equity in IDEA'' or ``significant 
disproportionality'' regulations, from July 1, 2018, to July 1, 2020. 
The Department also postpones the date for including children ages 
three through five in the analysis of significant disproportionality, 
with respect to the identification of children as children with 
disabilities and as children with a particular impairment, from July 1, 
2020, to July 1, 2022.

DATES: As of June 29, 2018, the date of compliance for recipients of 
Federal financial assistance to which the regulations published at 81 
FR 92376 (December 19, 2016) apply is delayed. Recipients of Federal 
financial assistance to which the regulations published at 81 FR 92376 
apply must now comply with those regulations by July 1, 2020, except 
that States are not required to include children ages three through 
five in the calculations under Sec.  300.647(b)(3)(i) and (ii) until 
July 1, 2022.

FOR FURTHER INFORMATION CONTACT: Mary Louise Dirrigl, U.S. Department 
of Education, 400 Maryland Avenue SW, Room 5156, Potomac Center Plaza, 
Washington, DC 20202-2600. Telephone: (202) 245-7324.
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION: On February 27, 2018, the Secretary 
published a notice of proposed rulemaking (NPRM) in the Federal 
Register (83 FR 8396) proposing to postpone by two years the date for 
States to comply with the ``Equity in IDEA'' or ``significant 
disproportionality'' regulations, 81 FR 92376 (December 19, 2016) (2016 
significant disproportionality regulations), from July 1, 2018, to July 
1, 2020. The NPRM also proposed to postpone the date for including 
children ages three through five in the analysis of significant 
disproportionality, with respect to the identification of children as 
children with disabilities and as children with a particular 
impairment, from July 1, 2020, to July 1, 2022.
    There are no differences between the NPRM and these final 
regulations.
    Public Comment: In response to our invitation in the NPRM, 390 
parties submitted comments on the proposed regulations.
    Analysis of Comments and Changes: An analysis of the comments 
follows.

Current State Practice and Impacts on Children With Disabilities

    Comments: Many commenters opposed postponing the compliance date 
for the 2016 significant disproportionality regulations, stating in 
various ways that the status quo is unacceptable. A few of these 
commenters argued that States failed to identify significant 
disproportionality in the identification, placement, and discipline of 
children with disabilities, despite the fact that, in the commenters' 
view, they should. The commenters argue that, in their view, States' 
failure to identify or remedy significant disproportionality under IDEA 
has been a known civil rights problem for many years, that this failure 
has received sufficient study, and that the Department should not delay 
any further in addressing the issue.
    Other commenters elaborated. Some stated that improperly 
identifying, placing, or disciplining children causes them harm by 
segregating them and depriving them of the services they need to 
receive a free appropriate public education (FAPE) in the least 
restrictive environment. Some stated that significant 
disproportionality arises from discrimination or, according to one 
commenter, improper or ineffective State policies. Other commenters 
stated that improper discipline can place children in the ``school-to-
prison pipeline.'' Some of these commenters argued that the status quo 
had high, long-term social and economic costs to children with 
disabilities and to society. These commenters opposed postponing the 
compliance date so that the harm to children with disabilities may be 
addressed as quickly as possible.
    Still others elaborated further, some sharing personal experiences 
and observations of the improper identification, placement, or 
discipline of children of color with disabilities and others providing 
lengthy, detailed, and scholarly discussions of significant 
disproportionality and of interventions proven to be successful in, for 
example, addressing disciplinary issues. These commenters too opposed 
postponing the compliance date so that the harm to children with 
disabilities may be addressed as quickly as possible.
    Discussion: The Department does not agree with the commenters that 
the causes of, and remedies for, significant disproportionality based 
on race and ethnicity in the identification, placement, and discipline 
of children with disabilities in LEAs across the country have received 
sufficient study. The Department does agree with those commenters who 
asserted that the status quo requires further scrutiny and study to, 
among other things, review the conflicting research regarding 
significant disproportionality and the over or under identification of 
children in special education. The Department also believes that the 
racial disparities in the identification, placement, or discipline of 
children with disabilities are not necessarily evidence of, or 
primarily caused by, discrimination, as some research indicates. See, 
e.g., Paul L. Morgan, et al, ``Are Minority Children Disproportionately 
Represented in Early Intervention and Early Childhood Special 
Education?'', 41 Educational Researcher 339 (2012) (that higher 
minority identification and placement rates reflect higher minority 
need, not racism); John Paul Wright, et al, ``Prior problem behavior 
accounts for the racial gap in suspensions,'' 42 Journal of Criminal 
Justice 257 (2014) (racial gap in suspensions is not due to racism).
    The over-representation of one racial or ethnic group that rises to 
the level of significant disproportionality may occur for a variety of 
other reasons. These include systemic challenges that State educational 
agencies (SEAs) and local educational agencies (LEAs) face in meeting 
the capacity and training needs of teachers and staff in properly 
identifying, placing, or disciplining children with disabilities.
    The reasons also include, as we stated in the 2016 significant 
disproportionality regulations, appropriate identification where there 
is higher prevalence of a disability in a particular racial or ethnic 
group, as well as correlatives of poverty and the presence of 
specialized schools, hospitals, or community services that may draw 
large numbers of children with disabilities and their families to an 
LEA. 81 FR 92380-92381, 92384.
    Further, courts have repeatedly noted that overrepresentation is 
not necessarily due to discrimination. The Supreme Court has noted that 
the fact that a group's ``representation'' is not in ``proportion'' to 
its share of the ``local

[[Page 31307]]

population'' is not proof of discrimination. See Richmond v. J.A. 
Croson Co., 488 U.S. 469, 507 (1989). Lower courts have similarly 
concluded that ``disparity does not, by itself, constitute 
discrimination,'' see Belk v. Charlotte-Mecklenburg Board of Education, 
269 F.3d 305, 332 (4th Cir. 2001) (en banc), either in discipline, see 
id.; see also People Who Care v. Rockford Board of Education, 111 F.3d 
538, 538 (7th Cir. 1997), or in special education, see id. at 538. In 
short, the presence of significant disproportionality is not 
necessarily an indication of underlying racial or ethnic 
discrimination.
    As explained in the discussion of comments that follow, the 
Department is not certain that the standard methodology in the 2016 
significant disproportionality regulations is the best method for 
States to identify significant disproportionality in LEAs across the 
country. Postponing the compliance date will give us the opportunity to 
thoughtfully and soundly evaluate the regulations and issues raised in 
this rulemaking to best ensure that all children with disabilities are 
appropriately identified, placed, and disciplined, and that all 
children get the services they need and receive FAPE in the least 
restrictive environment. To this end, the Department will explore how 
to best implement the statute in a legally viable manner that addresses 
over-identification, without incentivizing under-identification.
    We disagree, in sum, with commenters who assumed or explicitly 
stated that the standard methodology in the 2016 significant 
disproportionality regulations is the appropriate mechanism to address 
problems in the status quo. The delay will also give States the 
opportunity to examine this issue through their own policies and 
procedures.
    Changes: None.
    Comments: A number of commenters asserted that delaying the 
compliance date and allowing the status quo to continue for (at least) 
two more years is, variously, morally wrong, the wrong message to send 
to children with disabilities and their families, inconsistent with the 
purpose of IDEA to reduce disproportionality, inconsistent with 
congressional intent, and a failure to champion the rights of children 
with disabilities.
    Discussion: We disagree. Like the comments just discussed, these 
comments also assume, or state outright, that the standard methodology 
is the appropriate method for States to identify significant 
disproportionality. The Department is not certain that this is the 
case. It would be wrong and inconsistent with IDEA to require a system 
that potentially denies services based on a child's ethnic or racial 
status/group. We are concerned the 2016 significant disproportionality 
regulations could result in de facto quotas, which in turn could result 
in a denial of services based on a child's ethnic or racial status/
group. The Secretary is concerned that the regulations will create an 
environment where children in need of special education and related 
services do not receive those services because of the color of their 
skin.
    The risk ratio approach is not required by section 618(d) of the 
statute, which does not require any particular methodology. We would 
like to explore how best to implement the statute with additional 
flexibilities and/or protections. As explained in the discussion of 
comments that follows, postponing the compliance date will give us the 
opportunity to further evaluate the regulations and issues raised in 
this rulemaking.
    Changes: None.

Quotas

    Comments: Some commenters stated that the compliance date should be 
postponed and that the 2016 significant disproportionality regulations 
should, ultimately, be repealed. These commenters expressed concern 
that the standard methodology establishes, or will cause LEAs to 
establish, racial or ethnic quotas for the number of children who may 
be identified as children with disabilities or children with a 
particular disability, placed in a given placement, or disciplined.
    One commenter argued that the risk of quotas justified a temporary 
postponement, even assuming the standard methodology makes sense in the 
long run. The commenter argued that due to disadvantages they face, 
disproportionate numbers of African-American children need special 
education and related services, but these disparities may sufficiently 
diminish in the future and African-Americans will no longer risk being 
denied access to special education and related services due to a quota.
    Some commenters stated that LEAs would have an incentive to make 
decisions about identifying, placing, and disciplining children with 
disabilities to satisfy a quota, not on the basis of each child's 
individual needs, and thus contrary to IDEA's fundamental approach for 
providing each child with FAPE. Other commenters, similarly, found that 
the incentive for quotas are built into the risk ratio itself because 
States have to make determinations of significant disproportionality by 
limiting the number or percentage of children of a certain race or 
ethnicity identified, placed, or disciplined in a certain way.
    A few other commenters argued that the text of 20 U.S.C. 
1418(d)(2)(B) mandates a focus on disproportionate over-identification 
of a minority group versus the correct rate in determining the 
existence of disproportionality, rather than overrepresentation 
compared to the population, as the standard methodology does. They 
argued that its use of overrepresentation compared to the population as 
the benchmark for disproportionality creates serious constitutional 
problems that should be avoided. Others similarly argued that the focus 
should be on ``differential treatment'' of minorities, not higher 
identification rates that merely reflect appropriate identification.
    A commenter stated that racial quotas and preferences, express or 
implied, are impermissible under the laws of a number of States that 
forbid racial preferences, even when they might be allowed under 
Federal law. Therefore, the commenter argued, the Department ought to 
postpone the compliance date in order to address the implications for 
using the standard methodology in those States.
    Still a few others noted that establishing racial or ethnic quotas 
could expose States, LEAs, and their officials to legal liability.
    Most commenters disagreed, stating that quotas are not the goal of 
the rule, which instead was to create a more equitable playing field 
for all children. Some of these commenters elaborated that the 
Department and States could mitigate the risk of quotas through close 
monitoring of States for compliance with IDEA. Another commenter noted 
that quotas would be more likely if the regulations mandated a specific 
risk ratio threshold, which they do not.
    One commenter stated that the significant disproportionality 
provision has been part of the law for 15 years, yet there is no 
evidence of any misunderstanding of the statute or that there has been 
insufficient time for issues to arise and be resolved.
    Two commenters argued that significant disproportionality is not 
the only provision in IDEA that could incentivize quotas and that 
delaying the compliance date will not reduce these other incentives for 
quotas.
    One commenter suggested several alternatives to delaying the 
compliance date including, that the Department not regulate at all, 
require compliance with

[[Page 31308]]

the 2016 significant disproportionality regulations until the 
Department develops a new regulation to supersede it, and to provide 
more technical assistance. This commenter stated that adoption of one 
of these alternatives would allow the Department to evaluate whether 
quotas are being used and how to prevent their use.
    Another commenter argued that even if the substance of the 2016 
significant disproportionality regulations is sound, the regulations 
should be postponed because the definition of disproportionality 
amounted to a racial classification, which constitutionally cannot be 
imposed by an agency until after it makes specific evidentiary findings 
of ``widespread discrimination'' of the sort that did not accompany the 
2016 significant disproportionality regulations.
    Discussion: The Secretary believes that education should fail no 
child because of the color of his or her skin. No child should be 
misidentified as a child with (or without) a disability, placed in a 
more restrictive setting, or improperly disciplined because of the 
color of his or her skin or his or her ethnic background. These are 
precisely the risks that the Department believes the standard 
methodology may pose and, therefore, we believe it is necessary to 
evaluate further the issues raised in this rulemaking.
    Court rulings make clear that a regulatory requirement can create 
an illegal incentive for de facto quotas or racial preferences even 
when that is not the intent of the regulation, and even when the 
regulation purports to prohibit quotas. For example, financial 
``pressure'' or ``incentive to meet'' racial ``numerical goals'' can 
violate the Constitution, even when accompanied by a stated command not 
to discriminate. Lutheran Church v. FCC, 141 F.3d 344, 352 (DC Cir. 
1998). Similar principles obtain with respect to discipline and 
placement in the education context. See People Who Care v. Rockford 
Board of Education, 111 F.3d 528, 538 (7th Cir. 1997).
    The Department is concerned that the 2016 significant 
disproportionality regulations may create an incentive for LEAs to 
establish de facto quotas in identification, placement, and 
discipline--or otherwise create a chilling effect on such 
identification--to avoid being identified with significant 
disproportionality and having to reserve 15 percent of their IDEA Part 
B subgrant to provide comprehensive coordinated early intervening 
services (CEIS). If, as one commenter asserts, there are other 
provisions in IDEA that incentivize quotas, those are not the subject 
of this rulemaking exercise.
    The Department attempted to address the concern about quotas in the 
2016 significant disproportionality regulations by noting that quotas 
were prohibited and including specific language in the 2016 significant 
disproportionality regulations to note that nothing in the rule 
abrogated the right to FAPE in the least restrictive environment. The 
discussion in the 2016 significant disproportionality regulation 
disclaiming an intent to establish quotas is insufficient protection 
against LEAs creating de facto quotas because, regardless of the 
disclaimer, the regulations themselves may, in fact, incentivize 
quotas. In light of this and commenters' ongoing concerns about this 
issue, further evaluation is needed.
    We agree with commenters that the 2016 significant 
disproportionality regulations may create an incentive for LEAs to 
establish de facto quotas for the identification, placement, and 
discipline of children with disabilities and to artificially reduce the 
number of children identified, placed outside of the regular classroom, 
and disciplined to avoid being identified with significant 
disproportionality and being required to reserve 15 percent of their 
IDEA Part B subgrant to provide comprehensive CEIS. We are delaying the 
compliance date to evaluate our regulatory approach to ensure that it 
implements the statute in a manner that does not incentivize quotas.
    Put somewhat differently, if to stay under a State-mandated risk 
ratio threshold, LEAs are not properly identifying, placing, or 
disciplining children, then LEAs are not providing special education 
and related services based on the needs of each individual child as 
IDEA requires. Instead, the individualized education program, developed 
and revised in accordance with IDEA requirements, as necessary, to meet 
the unique and specific needs of each child, is the mechanism to ensure 
each child receives FAPE. However, creating an environment where LEAs 
and schools may engage in practices designed to artificially avoid 
exceeding the State-established risk ratio threshold for 
identification, placement, and discipline over meeting each individual 
child's needs, could undermine IDEA's focus on the individual needs of 
each child and, in turn, individualized decision-making. We believe the 
issue of incentivizing quotas, and potentially undermining the focus on 
individualized educational determinations, is an important issue to 
examine further before requiring compliance with the 2016 significant 
disproportionality regulations.
    Some commenters noted that compliance with numerical thresholds can 
have unintended consequences and have, in some instances, resulted in 
the denial of FAPE to children with disabilities. For example, as some 
commenters also noted, in the State of Texas, the SEA's Performance-
Based Monitoring and Analysis system measured the percentage of 
children identified as children with disabilities and receiving special 
education and related services under IDEA against a standard 
identification rate of 8.5 percent. Although exceeding 8.5 percent was 
not prohibited, because LEAs were measured against a numerical standard 
that would determine the level of monitoring the LEA would receive, 
LEAs around the State reduced the number of children they identified as 
children with disabilities under IDEA to no more than 8.5 percent of 
their student populations, thereby potentially depriving many children 
of the special education and related services to which they were 
entitled under IDEA.
    Here, under the standard methodology, exceeding the risk ratio 
threshold may result in an LEA being identified with significant 
disproportionality, which would result in the LEA being required under 
IDEA section 618(d)(2) to reserve 15 percent of its IDEA Part B 
(section 611 and section 619) funds for comprehensive CEIS. We want to 
evaluate whether the numerical thresholds in the 2016 significant 
disproportionality regulations may incentivize quotas or lead LEAs to 
artificially reduce the number of children identified as children with 
disabilities under the IDEA. While Texas has eliminated the 8.5 percent 
indicator, it is a clear example of what can happen when schools are 
required to meet numerical thresholds in conjunction with serving 
children with disabilities.
    Even if the regulations would not lead to any rigid racial quotas, 
postponement would still be appropriate. Risk ratios are determined by 
comparing the risk of a particular outcome for children in one racial 
or ethnic group to the risk of that outcome for children in all other 
racial and ethnic groups. This renders risk ratios racial 
classifications subject to constitutional scrutiny. See, e.g., Walker 
v. City of Mesquite, 169 F.3d 973 (5th Cir. 1999).
    The Federal government cannot impose or incentivize such racial 
classifications until after it makes findings of widespread 
discrimination necessitating their use. See Shaw v. Hunt, 517 U.S. 899, 
908 n.4 (1996);

[[Page 31309]]

Middleton v. City of Flint, 92 F.3d 396, 405 (6th Cir. 1996). The 
Department did not make any such findings in the Federal Register 
notice accompanying its 2016 significant disproportionality 
regulations. See 81 FR at 92381, 92384. So even if one assumes that the 
text and substance of the regulations are sound, and States should 
ultimately be required to comply with them, the procedural predicate 
for requiring such compliance is not yet present, because their basis 
was not adequately articulated.
    We disagree with one commenter's assertion that the nearly 15 years 
of implementation of the most recent amendments to the IDEA makes it 
less likely that the 2016 significant disproportionality regulations 
could result in the use of quotas. Prior to the 2016 significant 
disproportionality regulations, as many other commenters note, while 
many States used versions of the risk ratio, States had varying 
methodologies for identifying significant disproportionality, and the 
majority of States would be implementing methodologies consistent with 
the 2016 significant disproportionality regulations for the first time.
    Regarding the commenters' suggested alternatives--including close 
monitoring of States for compliance with IDEA, mandating a specific 
risk ratio threshold, and establishing an appropriate identification 
rate--some are not feasible. In adopting the 2016 significant 
disproportionality regulations, we considered specifying risk ratio 
thresholds and identification rates but could not arrive at a non-
arbitrary way to do so. That has not changed.\1\ As to monitoring, we 
are not certain that compliance-driven monitoring will, by itself, 
effectively address the factors contributing to significant 
disproportionality or enable the Department to best support States to 
improve their systems. Because monitoring may not be able to resolve 
applicable issues, we will evaluate the question during the delay as 
part of our review of the 2016 significant disproportionality 
regulations. However, as a matter of general practice and in keeping 
with the Department's commitment to continuous improvement, we are 
looking at all of our processes, including monitoring, to ensure they 
are effectively leveraged to support States in efforts to ensure that 
all children with disabilities receive appropriate special education 
and related services.
---------------------------------------------------------------------------

    \1\ We would like to explore how best to implement the statute 
with additional flexibilities and/or protections. Even if, upon 
additional review, the Department were to determine that a risk 
ratio methodology is permissible, it could only be implemented after 
making a finding to that effect and if rigorous legal safeguards and 
protections are guaranteed.
---------------------------------------------------------------------------

    The Secretary is reluctant to implement a methodology that may 
result in encouraging quotas or significantly reducing the number of 
children with disabilities identified, placed, and disciplined, and 
cause more of the very same effects upon children in States around the 
country.
    Instead, the Department will delay the compliance date for two 
years while we evaluate what the comments make clear is a complex 
question.
    Changes: None.

Fairness to States--Work Already Done

    Comment: A number of commenters argued that the Department should 
not postpone the compliance date as a matter of fairness. For States 
already close to full implementation of the regulations--and a few 
commenters stated this was many, if not all, States--a postponement so 
close to the original compliance date would disregard their compliance 
efforts to date, disregard the costs of these efforts to date, reward 
States that have not been so diligent, and potentially cause confusion. 
Some of these commenters, therefore, suggested that if the Department 
were to postpone the compliance date, States that choose to do so 
should be permitted to implement the 2016 significant 
disproportionality regulations for school year (SY) 2018-19, as 
originally planned.
    Other commenters disagreed, noting that some States need additional 
time to implement or study the standard methodology and comprehensive 
CEIS. Still others noted that the Department should provide TA to 
States that need it and that some States are already reducing 
significant disproportionality by implementing multi-tiered systems of 
support, though neither of these are particularly affected by delaying 
the compliance date.
    Discussion: We recognize the time, effort, and resources States 
have already committed to implementing the regulations. Delaying the 
compliance date does not disregard this important work. The NPRM 
proposing the delay did not propose to preclude States from continuing 
their efforts and using the standard methodology, or any other 
methodology for that matter, during the two-year delay. States may 
implement the standard methodology or may use any methodology of their 
choosing to collect and examine data to identify significant 
disproportionality in their LEAs until the Department evaluates the 
regulations and issues raised in this rulemaking. Note, some States 
have communicated to the Department that they need additional time to 
properly implement the 2016 significant disproportionality regulations, 
and this delay will provide that time to those States as well as allow 
the Department to evaluate these important issues further.
    The delay of the compliance date does not, of course, affect a 
State's annual obligation under IDEA section 618(d)(1) to collect and 
examine data to determine whether significant disproportionality based 
on race or ethnicity is occurring in the State and LEAs of the State 
with respect to the identification, placement and discipline of 
children with disabilities. In addition, the State must ensure that if 
an LEA is identified with significant disproportionality, it implements 
the remedies in IDEA section 618(d)(2), which includes review and, if 
appropriate, revision of policies, procedures, and practices; publicly 
reporting on any revisions; and reserving 15 percent of IDEA Part B 
funds to provide comprehensive CEIS.
    But to determine whether significant disproportionality exists in 
its LEAs in SY 2018-2019 and SY 2019-2020, during the period of this 
delay, a State may use the methodology it had in place before the 
Department published the 2016 significant disproportionality 
regulations, or any other methodology for collecting and examining data 
to identify significant disproportionality that the State deems 
appropriate. The Department will work with States to provide technical 
assistance where it is needed.
    Changes: None.

Limitations in the Standard Methodology

    Comment: A number of commenters argued that the Department should 
delay implementation of the 2016 significant disproportionality 
regulations because of limitations in the standard methodology itself: 
Given the number of categories of analysis, there is likely to be some 
kind of significant disproportionality in LEAs with large populations; 
risk ratios and alternate risk ratios are less meaningful measures in 
LEAs with small or homogenous populations; and there are often data 
quality and data availability issues.
    By contrast, a number of other commenters argued that the 
Department should not delay implementation of the regulations because 
the standard methodology works well--providing States with flexibility 
to address their individual student populations--or well enough that 
any limitations in the

[[Page 31310]]

methodology may be addressed through implementation.
    Discussion: We recognize the merits of both positions. Given our 
concern about quotas reducing the number of children identified with 
disabilities and depriving them of needed special education and related 
services, we believe it is more prudent to delay the compliance date 
and address that concern through a review of the standard methodology 
before States are required to implement the regulations rather than 
during implementation.
    As to the other possible shortcomings the commenters pointed out, 
these are issues we fully anticipate will be addressed during our 
review of the standard methodology.
    Changes: None.

Limitations Not Directly Related to the Standard Methodology

    Comment: A number of commenters argued that the Department should 
delay the compliance date of the 2016 significant disproportionality 
regulations for reasons mostly unrelated to the standard methodology: 
That the causes of significant disproportionality, such as a lack of 
access to adequate healthcare and other correlatives of poverty, are 
larger societal issues outside of the control of schools and that 
research is unclear whether the problem of significant 
disproportionality is over-identification or under-identification of 
children with disabilities. Some of these commenters argued that 
Congress is better suited to address all these issues, while others 
argued that the schools should be given the opportunity afforded by 
postponing the compliance date to attempt to address the causes of 
significant disproportionality.
    A few commenters drew the opposite conclusion from similar 
observations. They asserted that the standard methodology should be 
left to go into effect in July 2018 and schools and governments can 
work together to address the broad issues surrounding the issue of, and 
the root causes of, significant disproportionality. One commenter 
advocated that disproportionality should be measured as both over-
identification and under-identification in each category of 
identification for special education and related services.
    Still other commenters supported a delay and suggested repeal of 
the 2016 significant disproportionality regulations for financial 
reasons: LEAs identified with significant disproportionality must 
reserve 15 percent of their IDEA Part B funds to implement 
comprehensive CEIS, which could shift funding from children with 
disabilities and increase State maintenance of fiscal support 
requirements. One commenter noted that significant disproportionality 
should be addressed using a different source of funding than IDEA. 
Another noted that the reservation of funds could negatively affect 
LEAs that themselves do not have significant disproportionality but are 
located within, or are members of, Educational Service Agencies that 
are identified with significant disproportionality. One commenter noted 
that the reservation of 15 percent of funding was excessive in an 
instance where a change to policies, procedures, and practices would 
result in eliminating significant disproportionality within their LEA, 
and another suggested the Department allow States additional exemptions 
to limit LEAs from being required to reserve 15 percent of their 
funding if the LEAs met certain criteria.
    Discussion: Though issues concerning comprehensive CEIS arise from 
statutory requirements and not the 2016 significant disproportionality 
regulations, these other observations further demonstrate the 
complexity of the issues presented by the 2016 significant 
disproportionality regulations. We anticipate these will be included in 
our broader evaluation of the regulations going forward. Changes beyond 
a delay in the compliance date may require a statutory or regulatory 
change. Commenters made these and similar arguments and observations in 
response to the March 2, 2016, NPRM that proposed the significant 
disproportionality regulations (81 FR 10968).
    As we stated in the preamble to the 2016 significant 
disproportionality regulations: Racial and ethnic disparities in the 
identification, placement, and discipline of children with disabilities 
can have a wide range of causes, including systemic issues well beyond 
the typical purview of most LEAs (81 FR 92383-92384, causes of racial 
and ethnic disparity that originate outside of school); the Department 
has an obligation to implement and enforce the requirements of IDEA as 
they exist today, and we will work with Congress on any potential 
changes to IDEA, including to section 618(d) (81 FR 92380, the 
Department should await congressional action); we understand that 
overrepresentation of one racial or ethnic group that rises to the 
level of significant disproportionality may occur for a variety of 
reasons, including over-identification of that racial or ethnic group, 
under-identification of another racial or ethnic group or groups, or 
appropriate identification with higher prevalence of a disability in a 
particular racial or ethnic group (81 FR 92380-92381, under-
identification versus over-identification); it is quite possible for 
children with disabilities from a particular racial or ethnic subgroup 
to be identified, disciplined, or placed in restrictive settings at 
rates markedly higher than their peers in other LEAs within the State 
(81 FR 92399-92405, exemptions to LEAs, racially homogenous LEAs and 
those with small populations); the Department reads the term 
``placement'' in the introductory paragraph of section 618(d)(2) to 
include disciplinary actions that are also removals of the child from 
his or her current placement for varying lengths of time, including 
removals that may constitute a change in placement under certain 
circumstances (81 FR 92442-92443, authority to use discipline as a 
category of analysis); regardless of IDEA funding levels, States must 
comply with all IDEA requirements, including the requirements related 
to significant disproportionality (81 FR 92446-92448, funding IDEA and 
comprehensive CEIS); an LEA identified with significant 
disproportionality will not be able to take advantage of the LEA MOE 
adjustment that would otherwise be available under Sec.  300.205 
because of the way that the MOE adjustment provision and the authority 
to use Part B funds for CEIS are interconnected (81 FR 92451-92452, 
implications of comprehensive CEIS for LEA maintenance of effort). 
These observations further demonstrate the complexity of the issues 
presented by the 2016 significant disproportionality regulations. We 
will address these issues as appropriate in our evaluation.
    Changes: None.

Limiting Comments

    Comment: Pointing to the statement in the NPRM that ``[we] will not 
consider comments on the text or substance of the final regulations'' 
(83 FR 8396), a small number of commenters stated that the Department 
has improperly limited the comments it will consider and that it is not 
seeking comments with an open mind. As evidence, one commenter cited a 
statement by a Department spokesperson that ``ED is looking closely at 
this rule and has determined that, while this review takes place, it is 
prudent to delay implementation by two years.''
    Discussion: In inviting comment on the NPRM, we stated:

    We invite you to submit comments on this notice of proposed 
rulemaking. We will

[[Page 31311]]

consider comments on proposed compliance dates only and will not 
consider comments on the text or substance of the final regulations. 
(83 FR 8396.)

    We did not improperly limit comments. Rather, we asked the public 
to speak to the question of whether the Department should postpone the 
compliance date of the 2016 significant disproportionality regulations, 
rather than to discuss, without reference to the delay, what the text 
or substance of any new regulations should be.
    Indeed, commenters appear to have understood this and commented on 
the proposed delay and the substance of the 2016 significant 
disproportionality regulations in connection with the delay.
    The Department received approximately 25 percent more comments on 
the NPRM proposing postponement of the compliance date (390 parties) 
than it did in response to its invitation to comment on the significant 
disproportionality regulations in 2016 (316 parties). We received 
comments not only on the proposed delay of the compliance date but also 
on the substance of the 2016 significant disproportionality regulations 
themselves, the adequacy (or inadequacy) of our rulemaking process 
under the Administrative Procedure Act (APA), the regulatory impact 
analysis, the cost benefit analysis, and the statement of alternatives 
considered. Commenters recognized that the NPRM invited comments on the 
merits of the 2016 significant disproportionality regulations, with 
several going so far as to criticize the Department for inviting 
comments on issues that had already been covered in 2016.
    The full statement made by a Department spokesperson indicates no 
more than the proposal reflected in the NPRM itself that a delay of two 
years would be prudent and does not connote a lack of reasonable 
consideration of the public's perspectives:

    Through the regulatory review process, we've heard from states, 
school districts, superintendents and other stakeholders on a wide 
range of issues, including the significant disproportionality rule. 
Because of the concerns raised, the department is looking closely at 
this rule and has determined that while this review takes place, it 
is prudent to delay implementation for two years.

    Consistent with the APA, the Department properly sought public 
comment on the proposal to delay the compliance date for the 2016 
significant disproportionality regulations. We reviewed and considered 
those comments and, in this document, we are responding in detail to 
all of the comments we received.
    Changes: None.
    Comments: A few commenters expressed concern that one of the 
commenters cited in the NPRM who submitted comments in response to the 
Department's 2017 regulatory reform notice that were critical of the 
2016 significant disproportionality regulations is now employed by the 
Department.
    One of these commenters was concerned that the Department did not 
timely respond to a Freedom of Information Act (FOIA) request seeking 
the public comments on significant disproportionality that the 
Department relied upon in the NPRM. This commenter, therefore, 
suggested that the Department should seek a second round of comments 
after clarifying that it will consider comments on the text and 
substance of the 2016 significant disproportionality regulations.
    Discussion: There is no prohibition against any individual 
submitting comments on a Department rulemaking and then subsequently 
accepting employment at the Department. In addition, other commenters 
expressed similar concerns regarding the regulations and the Department 
took all of these into account in its analysis. With respect to the 
FOIA request, the comments that informed the NPRM are a matter of 
public record, as are all of the comments we received in response to 
the Department-wide regulatory review. Given the availability of those 
comments, we do not agree with the commenter that the nature of the 
Department's response to a FOIA request requires that we establish a 
second comment period.
    Changes: None.

Justification Under APA

    Comment: Many commenters asserted that the Department did not 
adequately justify delaying the compliance date because there has been 
no change in circumstances since the publication of the 2016 
significant disproportionality regulations. These commenters point out 
that the Department's only stated justifications for the delay are 
topics that were already subject to notice and comment and addressed in 
the 2016 significant disproportionality regulations. These topics 
included discussions of the Department's statutory authority, the 
examination of group outcomes through statistical measures rather than 
the individual needs of each child, incentives for racial quotas, lack 
of clear guidance on ``reasonableness,'' and alignment with State 
Performance Plan indicators.
    Discussion: The Department agrees that it discussed these topics in 
the 2016 significant disproportionality regulations but disagrees that 
this precludes the Department from re-evaluating the 2016 significant 
disproportionality regulations and the reasoning and evidence 
supporting them. The APA does not bind an agency to its earlier policy 
determinations, even in the absence of changed facts and circumstances, 
provided that the agency discloses what it is doing and why, which we 
have done here.
    Even though the Department addressed the issue of quotas in the 
2016 significant disproportionality regulations, the Department is 
concerned that it did not give sufficient weight to incentives for, and 
consequences of, express or implied racial quotas. The Department's 
response was, essentially, to prohibit the use or implementation of 
quotas, while maintaining a regulatory framework that nonetheless 
requires establishing numerical thresholds. As indicated, such a system 
may result in de facto quotas that have significant effects on the 
proper identification, placement, and discipline of children with 
disabilities. As some commenters noted, in response to a numerical 
threshold point in the State's Performance-Based Monitoring and 
Analysis System, many LEAs in Texas reduced the number of children 
identified as children with a disability under the IDEA. We believe the 
issue of incentives for, and consequences of, express or implied racial 
quotas warrants further examination prior to requiring compliance with 
the standard methodology. The Department believes it is important to 
postpone the compliance date of the 2016 significant disproportionality 
regulations now so that it may weigh the risk of denying FAPE to many 
children with a disability due to the potential use of quotas against 
the benefits of implementing the standard methodology.
    Changes: None.
    Comment: One commenter argued that a two-year delay will not add 
any additional insights into the proposed methods for reducing 
disproportionality beyond what has been found by previous Federal task 
forces, researchers, government agencies, and other experts.
    Discussion: The Department disagrees. Even since publication of the 
2016 significant disproportionality regulations, there has been further 
research that demonstrates the complexity of the issues presented by 
the 2016 significant disproportionality regulations. See, Paul Morgan, 
et al.,

[[Page 31312]]

``Are Black Children Disproportionately Overrepresented in Special 
Education? A Best-Evidence Synthesis'' 83 Exceptional Children (2017) 
and research cited therein. The Department will use the time provided 
by postponing the compliance date to examine the issues raised in this 
rulemaking.
    Changes: None.
    Comment: A few commenters suggested that Executive Order 13777 was 
not a proper basis for delaying the compliance date. The order, these 
commenters argued, was designed to reduce regulatory burden, but the 
NPRM does not mention burden as a justification for delaying the 
compliance date. One commenter argued the Department proposed a delay 
of these regulations to meet a quota imposed by Executive Order 13777 
to satisfy the regulatory reform agenda.
    Discussion: The Department disagrees. The commenters have described 
the scope of Executive Order 13777 too narrowly. Under that order, the 
Department created a regulatory reform task force that reviewed and 
solicited public comment on all of the Department's regulations and 
sought to identify regulations that: (i) Eliminate jobs, or inhibit job 
creation; (ii) are outdated, unnecessary, or ineffective; (iii) impose 
costs that exceed benefits; (iv) create a serious inconsistency or 
otherwise interfere with regulatory reform initiatives and policies; 
(v) are inconsistent with the requirements of section 515 of the 
Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 
3516 note), or the guidance issued pursuant to that provision, in 
particular those regulations that rely in whole or in part on data, 
information, or methods that are not publicly available or that are 
insufficiently transparent to meet the standard for reproducibility; or 
(vi) derive from or implement Executive Orders or other Presidential 
directives that have been subsequently rescinded or substantially 
modified.
    As we have explained, the Secretary is concerned that the 2016 
significant disproportionality regulations, potentially creates an 
express or implied incentive for LEAs to set quotas, may ultimately, 
and improperly, reduce the number of children identified as children 
with disabilities, properly placed, or disciplined. Therefore, in 
connection with our regulatory review under Executive Order 13777, we 
proposed and are now adopting a delay of the compliance date for the 
2016 significant disproportionality regulations. The delay effected by 
this rule is justified on the basis of the policy rationales advanced, 
irrespective of Executive Order 13777.
    Changes: None.
    Comment: Two commenters argued that the Department did not provide 
a reasoned basis for delaying the compliance date of the regulations 
and that the NPRM did not provide the public the transparency required 
by the APA.
    Discussion: The Department disagrees. We have stated the reasons 
for proposing and delaying the compliance date in the NPRM and at 
length here. The Department has complied with the APA and provided the 
public ample opportunity to meaningfully comment on the proposal to 
delay the compliance dates to July 1, 2020, and July 1, 2022, 
respectively.
    Changes: None.

Availability of Judicial Remedies

    Comment: One commenter argued the timing of the NPRM's publication 
recklessly or intentionally is so late that it prevents affected 
parties from having enough time to seek and obtain judicial review 
prior to the rule's effective date.
    Discussion: The Department disagrees. The timing of the NPRM was 
not an attempt to prevent parties from obtaining judicial review. The 
development of proposed rules is an involved process that takes time to 
complete. IDEA requires the Department to provide the public with a 75-
day comment period when regulating under Part B or Part C. (IDEA 
section 607(c); 20 U.S.C. 1406(c).) The Department has been working 
diligently to propose this delay; review, consider and respond to 
public comment; and publish a final rule. Nothing the Department has 
done prevents an aggrieved party from seeking judicial review after 
this document is published.
    The Department notes that, in any event, States may, and many 
States have commented that they intend to, implement the standard 
methodology in the 2016 significant disproportionality regulations even 
if the Department delays these regulations. States that choose not to 
implement the standard methodology may use any methodology of their 
choosing to collect and examine data to identify significant 
disproportionality in their LEAs until the Department evaluates the 
regulations and issues raised in this rulemaking, to best ensure that 
all children with disabilities are appropriately identified, placed, 
and disciplined, and that all children get the services they need and 
receive FAPE in the least restrictive environment.
    Changes: None.

Comprehensive CEIS

    Comment: Several commenters, both supportive of and opposed to 
postponing the compliance date, argued that the Department should 
maintain the expanded authorized use of funds for comprehensive CEIS 
under Sec.  300.646(d)(2), whether or not it postpones the compliance 
date. Specifically, the commenters argued that States in either case 
should still be permitted to allow LEAs to use funds reserved for 
comprehensive CEIS to serve children from age three through grade 12, 
with and without disabilities. This, the commenters argued, is a 
reasonable reading of the statute and a reasonable remedy for 
significant disproportionality.
    Some commenters argued that the Department did not have authority 
under IDEA to expand the authorized use of funds for comprehensive CEIS 
and that the Department should rescind this provision of the 
regulation. Others disagreed, stating that the Department has the 
authority to expand the use of funds for children three to five years 
old and children with disabilities and that the children most affected 
by significant disproportionality should have access to services 
provided through comprehensive CEIS.
    Discussion: The Department understands all of the commenters' 
concerns surrounding comprehensive CEIS, but the NPRM proposing the 
delay in the compliance date proposed no changes to the regulations 
governing comprehensive CEIS. The delay will give the Department the 
opportunity to review these issues in detail. Until the Department acts 
to change the regulations, however, LEAs may choose, consistent with 
the 2016 significant disproportionality regulations, to use IDEA Part B 
funds reserved for comprehensive CEIS to serve children ages three 
through grade 12, with and without disabilities, upon a determination 
of significant disproportionality, whether or not a State implements 
the standard methodology in the 2016 significant disproportionality 
regulations.
    Changes: None.

Remedies for Significant Disproportionality in Discipline

    Comment: Some commenters argued the Department did not have the 
authority under IDEA to include discipline as a type of 
disproportionality triggering action under 20 U.S.C. 1418(d)(2). Other 
commenters disagreed and noted that disciplinary actions can be 
considered a change in placement, and therefore, it is

[[Page 31313]]

appropriate to include discipline in the standard methodology.
    Discussion: We appreciate the comments. When Congress added 
discipline to IDEA section 618(d)(1) (20 U.S.C. 1418(d)(1)), it made no 
corresponding change to IDEA section 618(d)(2) (20 U.S.C. 1418(d)(2)), 
which created an ambiguity because IDEA section 618(d)(2) does not 
explicitly state that the remedies in IDEA section 618(d)(2) apply to 
removals from placement that are the result of disciplinary actions.
    The NPRM proposing the delay in the compliance date proposed no 
changes to the treatment of discipline under the 2016 significant 
disproportionality regulations. Until the Department evaluates the 
regulations and issues raised in this rulemaking, discipline remains a 
category of analysis for determining significant disproportionality, 
and the reservation of funds for comprehensive CEIS and the other 
statutory remedies apply upon a State's finding of significant 
disproportionality. The delay will give the Department the opportunity 
to review these issues in detail.
    Changes: None.

Children Ages Three Through Five

    Comment: A few commenters, while opposed to delaying the compliance 
date for school-aged children, did support delaying the compliance date 
for including data for children ages three through five years old due 
to issues with data quality and availability for this age range.
    Other commenters argued the Department did not provide any 
justification for delaying the compliance date to include data for 
children ages three through five, and one commenter argued that this 
delay would affect the collection of discipline data for this age 
range.
    Discussion: We disagree that we did not provide a justification for 
a delay in the compliance date for children ages three through five in 
the analysis of significant disproportionality, with respect to the 
identification of children as children with disabilities and as 
children with a particular impairment. We cited concerns about the 
potential effects of implementing the standard methodology for all age 
ranges, and we further agree with the commenters who cited concerns 
about data quality and missing data. We disagree with the commenter who 
argued the delay would affect existing discipline data collections; the 
delay does not affect any existing data collections. We therefore 
postpone the date for States to include children ages three through 
five years in their significant disproportionality analysis with 
respect to the identification of children as children with disabilities 
and as children with a particular impairment until July 1, 2022.
    Changes: None.

Non-Compliance

    Comment: One commenter argued the proposed rule seeks to delay 
compliance without explaining how the Department intends to ensure 
States and LEAs comply with IDEA in the meantime, and that the delay 
means that the Department has decided to ignore widespread 
noncompliance, an assertion made by a number of other commenters.
    Discussion: We disagree. As we explained earlier, the delay of the 
compliance date does not change the State's annual obligation under 
IDEA section 618(d)(1) to collect and examine data to determine whether 
significant disproportionality is occurring in the State and LEAs of 
the State with respect to the identification, placement, and discipline 
of children with disabilities. In addition, the State must ensure that 
if an LEA is identified with significant disproportionality, it 
implements the remedies in IDEA section 618(d)(2). Notwithstanding the 
delay, States must continue to make these annual determinations. To do 
so, they may use the methodology they had in place before the 
Department adopted the 2016 significant disproportionality regulations, 
the standard methodology in the 2016 significant disproportionality 
regulations, or any other methodology for collecting and examining data 
that the State, in its discretion, deems appropriate. As part of the 
IDEA Part B LEA Maintenance of Effort (MOE) Reduction and CEIS data 
collection, States will continue to report to the Department and the 
public whether each LEA was identified with significant 
disproportionality and the category or categories of analysis under 
which the LEA was identified. The Department will continue its 
monitoring activities under IDEA. As such, the Department is not 
ignoring widespread non-compliance with IDEA, but instead attempting to 
ensure compliance with IDEA's requirements.
    Changes: None.

Data

    Comment: One commenter argued that delaying the compliance date 
will deny the public the opportunity to receive information to which 
they are entitled under IDEA regarding the identity of LEAs found by 
States to have significantly disproportionality and how each LEA 
addressed significant disproportionality. Another commenter argued 
OSERS is responsible for gathering IDEA section 618(d) data on local 
special education disparities from State to State. The commenter 
further argued that OSEP should provide an LEA-level restricted-use 
data set for researchers only instead of only national and State level 
data. A number of commenters argued that delaying the compliance date 
deprives the public of the most-up-to-date information on significant 
disproportionality.
    Discussion: We disagree. The Department is not required under IDEA 
section 618 to collect data that States use to identify LEAs with 
significant disproportionality, such as risk ratios calculated as part 
of a review for significant disproportionality. In fact, collection of 
that data would be a significant and expensive undertaking, both for 
the States and the Department. While States report as part of the IDEA 
Part B LEA Maintenance of Effort (MOE) Reduction and CEIS data 
collection, whether each LEA was identified with significant 
disproportionality and the category or categories of analysis under 
which the LEA was identified, the Department is not required to provide 
the identity of LEAs identified with significant disproportionality.
    Changes: None.

Cost-Benefit Analysis

    Comment: One commenter stated that the Department did not include 
the correct number of States in the Analysis of Costs and Benefits. The 
commenter noted the Department calculated the cost for 55 States and 
believed this was an error. Other commenters noted the Department 
underestimated the number of States that will be ready to implement the 
regulations on July 1, 2018.
    Several commenters noted that State and local agencies have already 
expended resources to prepare to comply with the regulations on July 1, 
2018, and that these sunk costs should be included in the analysis of 
costs, benefits, and transfers. Those commenters also argued that the 
Department needs to account for the costs associated with the resources 
States will have to expend to help LEAs and parents understand the 
delay and the subsequent confusion caused by the delay.
    Discussion: Under IDEA section 602(31), the term ''State'' means 
each of the 50 States, the District of Columbia, the Commonwealth of 
Puerto Rico, and each of the outlying areas. Therefore, the Department 
calculated the costs associated with this regulation for the 50 States, 
the District of Columbia, Puerto Rico, Guam, American Samoa,

[[Page 31314]]

and the Virgin Islands, or 55 ''States'' as defined under IDEA. We 
address the balance of comments on the cost-benefit analysis in the 
Discussion of Costs, Benefits, and Transfers in the cost-benefit 
section of this document.
    Changes: None.

Alternatives Considered and Significance Under E.O. 12866

    Comments: One commenter argued the regulatory impact analysis in 
the NPRM was insufficient because the Department did not include 
alternatives such as not regulating; providing more technical 
assistance and guidance to States to avoid negative outcomes; 
evaluating the impact of the standard methodology; or publicizing 
compliance reviews under Title VI of the Civil Rights Act. Another 
commenter acknowledged the Department considered alternatives even 
though they disagreed with delaying the compliance date of the 
regulation. The same commenter argued the regulation was not a 
significant regulatory action.
    Discussion: We recognize that commenters had concern about the 
breadth of regulatory alternatives discussed in the NPRM and therefore 
have addressed additional alternatives in the regulatory impact 
analysis of this final rule. As for the significance of the 
regulations, we disagree that postponing the compliance date is not 
significant under the Executive Order 12866. We determined that it is 
significant because it raises novel legal or policy issues arising out 
of legal mandates. While the Department initially made that 
determination, it did so subject to the approval of the Office of 
Information and Regulatory Affairs (OIRA) in the Office of Management 
and Budget (OMB). We note as well that the proposal and adoption of the 
2016 significant disproportionality regulations were also significant 
regulatory actions.
    Changes: None.

Executive Orders 12866, 13563, and 13771

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
this regulatory action is ``significant'' and, therefore, subject to 
the requirements of the Executive order and subject to review by the 
Office of Management and Budget (OMB). Section 3(f) of Executive Order 
12866 defines a ``significant regulatory action'' as an action likely 
to result in a rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local or 
tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    This regulatory action is a significant regulatory action subject 
to review by OMB under section 3(f) of Executive Order 12866.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only upon a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor their regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things, and to the extent practicable--the costs 
of cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than specifying the behavior or manner of compliance that regulated 
entities must adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including providing economic incentives--such as user fees 
or marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are issuing these final regulations only upon a reasoned 
determination that their benefits justify their costs. Complying with 
the standard methodology imposes costs on regulated entities and, 
absent a clear understanding of the unintended consequences of the 
standard methodology, we believe it is appropriate to delay 
implementation of the 2016 significant disproportionality regulations. 
We believe that further review of the regulations is necessary to 
ensure that net benefits are maximized in the long-term and, as noted 
elsewhere in this notice, we believe that two years provides sufficient 
time for such review. Based on the analysis that follows, the 
Department believes that these regulations are consistent with the 
principles in Executive Order 13563.
    We also have determined that this regulatory action would not 
unduly interfere with State, local, and tribal governments in the 
exercise of their governmental functions.
    In this Regulatory Impact Analysis we discuss the need for 
regulatory action, alternatives considered, the potential costs and 
benefits, net budget impacts, assumptions, limitations, and data 
sources.

Need for These Regulations

    As explained in the preamble, this regulatory action will delay the 
compliance date of the 2016 significant disproportionality regulations. 
We are concerned that those regulations may not meet their fundamental 
purpose, namely to ensure the proper identification of LEAs with 
significant disproportionality among children with disabilities. This 
delay will give the Department, the States, and the public additional 
time to evaluate the questions involved and determine how best to serve 
children with disabilities without increasing the risk that children 
with disabilities are denied FAPE.

Alternatives Considered

    Without the delay of the July 1, 2018, compliance date, States and 
LEAs would be required to implement the 2016 significant 
disproportionality regulations. In addition to the alternatives 
discussed in the NPRM, the Department reviewed and considered various 
alternatives to the proposed rule submitted by commenters in response 
to the NPRM.
    The Department considered comments requesting that the Department 
withdraw the NPRM and

[[Page 31315]]

require States to comply with the standard methodology and modified 
remedies on July 1, 2018. We are declining this suggestion because, as 
stated throughout this document, we are concerned, among other reasons, 
about the potential unintended consequences of implementing the 2016 
significant disproportionality regulations and the potential denial of 
FAPE to children with disabilities.
    Other commenters noted the Department could take several steps to 
prevent unintended consequences without delaying the compliance date. 
For example, one commenter suggested the Department study whether 
quotas are being used and prevent their use. Other commenters suggested 
the Department could simply increase monitoring and enforcement of 
States and LEAs to prevent racial quotas or other unintended 
consequences. Another commenter suggested evaluating the impact of the 
standard methodology. Another commenter suggested the Department could 
provide additional technical assistance to prevent concerning outcomes. 
The same commenter suggested the Department initiate and publicize 
compliance reviews under Title VI of the Civil Rights Act to ensure 
States and LEAs do not adopt numerical quotas based on race. Knowing if 
these measures would be effective requires careful review, which we 
will do during this delay.
    As stated in the NPRM, the Department considered delaying the 
compliance date for one, two, and three years. Several commenters 
argued the justification provided for the number of years considered 
was insufficient. The Department welcomes the opportunity to clarify 
its justification. We believe that a one-year delay would not provide 
the Department sufficient time to examine the potential unintended 
consequences of the standard methodology; especially since it will take 
time for States to implement and the Department to review the impact of 
States that decide to implement the standard methodology. The 
Department believes that a three-year delay would postpone compliance 
for longer than necessary to complete the additional evaluation we plan 
to undertake. Therefore, the Department determined a two-year delay 
would provide sufficient time to review all the complex issues raised 
and discussed throughout this document, including looking more closely 
at the alternatives the commenters offered above, and determine how 
better to serve children with disabilities.

Discussion of Costs, Benefits and Transfers

    The Department has analyzed the costs and benefits of this final 
rule. Due to uncertainty about the number of States that will exercise 
the flexibility to delay implementation of the standard methodology, 
the number of LEAs that would be identified with significant 
disproportionality in any year, and the probable effects of any delay 
in implementation on services for children with disabilities, we cannot 
evaluate the costs and benefits of this regulation with absolute 
precision. In the NPRM, the Department estimated that these regulations 
would result in a cost savings of $10.9 to $11.5 million over ten 
years.
    However, a number of commenters raised concerns about our analysis, 
particularly noting the lack of a discussion of costs associated with 
these regulations and our estimation of the number of States that would 
exercise the flexibility to delay implementation under this regulation. 
The Department has reviewed these comments and has revised some 
assumptions in response to the information we received.
    We discuss specific public comments, where relevant, in the 
appropriate sections below. As a result of the changes discussed below, 
the Department now estimates this delay will result in a net cost 
savings of between $7.4 and $7.8 million over a ten-year period, with a 
reduction in associated transfers of between $41.5 and $43.8 
million.\2\
---------------------------------------------------------------------------

    \2\ The Department has included a copy of all calculation 
spreadsheets supporting this analysis in the docket folder for this 
notice.
---------------------------------------------------------------------------

Costs

    A number of commenters noted that our regulatory impact analysis in 
the NPRM did not include a discussion of costs, generally, while others 
specifically raised concerns regarding the likely effects of delayed 
implementation on the appropriate identification, placement, and 
discipline of children with disabilities, specifically arguing that a 
delay would likely result in improper identification, more restrictive 
placements, and more exclusionary discipline practices, all leading to 
higher school failures, drop outs, juvenile justice referrals or 
involvement, and lower quality long-term outcomes.
    One commenter noted that, in the 2016 significant 
disproportionality regulations, the Department estimated that the 
benefits of the rule outweighed the estimated costs of $50.1 to $60.5 
million. Therefore, the commenter argued, the costs of delay (a 
deferral of the benefits identified in the 2016 significant 
disproportionality regulations) must outweigh the benefits (reduced 
costs).
    In response to those commenters, we provide the following 
additional analysis. We believe that many of the commenters 
misunderstood the potential effects of this delay. In a number of 
cases, it was apparent that commenters believed a delay in the 
compliance date would exempt States from making annual determinations 
regarding significant disproportionality and requiring LEAs identified 
with significant disproportionality from reserving 15 percent of their 
IDEA Part B funds for comprehensive CEIS. That is incorrect.
    With this delay, States are still required to comply with the 
statutory requirements of IDEA, including an annual review for 
significant disproportionality. The delay in the compliance date only 
delays the date by which States would be required to implement the 
standard methodology. Further, States are still required to ensure that 
all children with disabilities are appropriately identified and receive 
a free appropriate public education in the least restrictive 
environment. To that end, we do not believe it is reasonable to assume 
that the full scope of ``costs'' identified by commenters will result 
from this regulatory action.
    Indeed, in the 2016 significant disproportionality regulations, the 
Department identified five sources of benefits from the significant 
disproportionality regulations: (1) Greater transparency; (2) increased 
role for the State Advisory Panels; (3) reduction in the use of 
inappropriate policies, practices, and procedures; (4) increased 
comparability of data across States; and (5) expansion of activities 
allowable under comprehensive CEIS. As many commenters noted, several 
of these benefits have already started to accrue.
    States have worked diligently since the publication of the 2016 
significant disproportionality regulations to meet the original July 1, 
2018, compliance date. As part of those efforts, they have involved a 
wide range of stakeholders, including their State Advisory Panels, to 
explore the issue of significant disproportionality and their current 
practices. Those efforts have greatly increased the transparency around 
State determinations and dramatically expanded the involvement of a 
diverse range of stakeholders, including State Advisory Panels and 
groups that had not historically been involved in special education 
issues.

[[Page 31316]]

    Further, nothing in this final rule would prohibit States and LEAs 
from using funds for comprehensive CEIS to serve children ages three 
through five and children with disabilities. As such, the only benefits 
we believe could be reasonably argued to be delayed as a result of this 
regulatory action would be the reduction in the use of inappropriate 
policies, practices, and procedures, and the increased comparability of 
data across States.
    We recognize that several commenters noted that they would use the 
delay to provide additional technical assistance to their LEAs to 
proactively resolve issues before they were identified under the 
standard methodology. As such, while some inappropriate policies, 
practices, and procedures may not be revised as a result of fewer LEAs 
being identified with significant disproportionality during the period 
of the delay, we believe that the increased focus on these issues since 
the publication of the 2016 significant disproportionality regulations 
and State technical assistance efforts in the interim may actually 
minimize the effects thereof. As in the 2016 significant 
disproportionality regulations, we are unable to meaningfully quantify 
the economic impacts of these costs.
    Several commenters argued that the delay in compliance date would 
result in confusion in the field and would require States to expend 
resources to clarify the regulatory environment for their LEAs and 
parents. While we recognize that a change in State plans for 
implementation will need to be communicated with LEAs and parents, we 
do not believe that such efforts would be exceptionally time-consuming 
given that most States that opt to delay implementation of the standard 
methodology will likely continue ongoing efforts to evaluate 
significant disproportionality.
    Nonetheless, we have revised our estimates to include the efforts 
of one management analyst for 160 hours for each State that opts to 
delay their compliance with the 2016 significant disproportionality 
regulations. As discussed below, we estimate there will be 35 States in 
this group. We believe that this amount of time would be far more than 
sufficient to address any and all concerns and confusion on the part of 
LEAs and parents regarding any delay and likely represents an 
overestimate of the actual burdens faced by such States. The Department 
estimates that this will result in a cost of approximately $249,980.

Benefits

    In the NPRM, the Department's estimated cost savings were based 
largely on an assumption of the number of States that would implement 
the standard methodology on July 1, 2018, the number that would 
implement on July 1, 2019, and the number that would implement on July 
1, 2020. A number of commenters raised concerns with our estimates 
because, they argued, the estimates did not appropriately capture costs 
already borne by States to implement the standard methodology, 
regardless of whether they delay implementation. However, it is clear 
to the Department that these costs are properly considered sunk 
investments, that is, expenditures already incurred by entities that 
cannot be recovered in any case. Regardless of whether the Department 
delayed the required compliance date, States would be unable to recover 
those expenses, and therefore it would not be appropriate to assign 
their value as either a cost or benefit of this action.
    However, we do note that nothing in this regulatory action 
invalidates the work already performed by States. States that are 
prepared to implement the standard methodology on July 1, 2018, remain 
able to do so, and those that delay implementation until a later date 
would not necessarily be required to recreate the work already 
completed. Nonetheless, the Department has made related adjustments to 
its cost estimates.
    Specifically, while sunk investments are not appropriately 
considered as a ``cost'' of any regulatory action, we recognize that 
our initial estimates did assume that States delaying compliance until 
2019 or 2020 would also delay all of their start-up activities as well. 
To the extent that these States, or a subset of them, have already 
completed some of these activities, we should not have calculated a 
cost savings based on delaying those activities for one or two years. 
While we cannot determine with absolute precision how many of these 
activities have already been completed by States given the information 
provided by the public, we will assume that approximately 50 percent of 
start-up activities for all States delaying implementation until 2019 
or 2020 have already occurred, and therefore will not calculate any 
cost savings associated with their delay. In addition, several 
commenters stated that the Department's estimates regarding the number 
of States that would implement the standard methodology in each year 
inappropriately inflated the calculated savings by estimating more 
States would delay implementation than was reasonable. Further, 
information received by the agency outside of this regulatory action, 
as well as other publicly available information, indicate that more 
than the 10 States initially estimated by the Department are likely to 
implement the standard methodology on July 1, 2018.
    Given this information, the Department has revised its estimated 
number of States implementing the standard methodology in each year. 
While the public comment raised this issue, it did not provide 
information on how many States, or which specific States, will 
implement the standard methodology on any given timeline. Given that we 
do not otherwise have data with regard to this matter, we cannot 
estimate these numbers with absolute precision. While we believe it is 
likely that a significant subset of States will choose to delay 
implementation of the standard methodology given the new flexibility 
under this rule, our revised estimates assume that 20 States will 
implement the 2016 significant disproportionality regulations on July 
1, 2018. We further assume 10 States will implement the standard 
methodology on July 1, 2019, with the remainder doing so on July 1, 
2020, if the standard methodology is required by law then.
    To the extent that more than 35 States take advantage of this new 
flexibility, these assumptions will result in an underestimate of 
actual cost savings of this final rule. For an analysis of the likely 
effect on the estimated cost savings of fewer States implementing the 
standard methodology on July 1, 2018, see the Sensitivity Analysis 
section of this document. In line with these revised estimates, we also 
estimate that 150 additional LEAs will be identified with significant 
disproportionality in Year 1, 220 in Year 2, and 400 in Year 3. Note 
that these assumptions are based on the number of States implementing 
the standard methodology in each year. At this time, the Department has 
received no information that would lead it to adjust its original 
estimated number of LEAs that would be identified in each year outside 
of a revision of the number of States.
    Given the revised assumptions noted above, the Department now 
estimates that the rule will result in $7.6 to $8.0 million in gross 
cost savings (benefits) over ten years.

Transfers

    As noted in the NPRM, the Department's calculation of total 
transfers under the rule is based on the number of LEAs newly 
identified as

[[Page 31317]]

having significant disproportionality in each year and then multiplying 
that total by 15 percent of the average LEA allocation. To improve 
comparability of estimates and provide greater transparency for the 
public, the Department has not updated baseline assumptions regarding 
the average required reservation per LEA for comprehensive CEIS. Given 
the revisions to our estimates discussed above, the Department now 
estimates that this rule will result in a net reduction in transfers of 
between $41.5 and $43.8 million over a ten-year period.

Sensitivity Analysis

    The Department's estimated costs and benefits of this final rule 
are driven largely by the estimated number of States that choose to 
implement the standard methodology in each year. As such, we have 
conducted an analysis to demonstrate the sensitivity of our estimates 
to these assumptions. In the table below, we note the estimated net 
cost savings, calculated at a 7 percent discount rate, for eight 
different scenarios. The scenarios are combinations of what we believe 
to be extreme upper and lower bound estimates of (1) the number of 
States implementing the standard methodology on July 1, 2018, and (2) 
the number of States delaying implementation for the full two years 
(until July 1, 2020).\3\
---------------------------------------------------------------------------

    \3\ The number of States implementing the standard methodology 
in July 1, 2019 is a function of the other two assumptions, and 
therefore does not need a separate range of assumptions.
---------------------------------------------------------------------------

    In addition to these extreme upper and lower bounds, we also 
provide estimates using the primary assumptions of the estimates 
described above. For the number of States implementing the standard 
methodology on July 1, 2018, we use an upper bound of 40 States and a 
lower bound of 15. For purposes of the number of States delaying 
implementation for the full two years, we use an upper bound which 
assumes all States not implementing on July 1, 2018 will delay the full 
two years and a lower bound which assumes that no States will opt to 
delay the full two years, but will only delay for a single year--until 
July 1, 2019.

             Table 1--Impact on Estimated Costs at Seven Percent Discount Rate of Varied Assumptions
----------------------------------------------------------------------------------------------------------------
                                                                  Number of States delaying for 2 years
                                                        --------------------------------------------------------
                                                            Upper bound      Primary estimate     Lower bound
----------------------------------------------------------------------------------------------------------------
Number of States implementing standard methodology on
 July 1, 2018:
    Upper Bound........................................       ($3,688,937)           [dagger]       ($2,074,891)
    Primary estimate...................................        (8,391,391)        (7,361,007)        (4,716,579)
    Lower Bound........................................        (9,729,101)        (8,115,057)        (5,470,627)
----------------------------------------------------------------------------------------------------------------
[dagger] No estimate is provided as a combination of the upper bound estimate of the number of States
  implementing the standard methodology on July 1, 2018 (40), and the primary estimate of the number delaying
  until July 1, 2020 (25) is not possible.

    As a result of these analyses, the Department believes it is 
reasonable to assume that, even when factoring in the potential 
unquantified costs of this action, this final rule represents a 
deregulatory action with net cost savings to regulated entities. We 
will further evaluate the analyses and assumptions upon which the cost-
benefit calculations are made along with the regulations and issues 
raised in this rulemaking, to best ensure that all children with 
disabilities are appropriately identified, placed, and disciplined, and 
that all children get the services they need and receive FAPE in the 
least restrictive environment.

Executive Order 13771

    This final rule is considered an E.O. 13771 deregulatory action. 
Consistent with Executive Order 13771 (82 FR 9339, February 3, 2017), 
we have estimated that this proposed regulatory action will not impose 
any net additional costs.

Regulatory Flexibility Act Certification

    The Secretary certifies that these regulations would not have a 
significant economic impact on a substantial number of small entities.
    The U.S. Small Business Administration (SBA) Size Standards define 
``small entities'' as for-profit or nonprofit institutions with total 
annual revenue below $7,000,000 or, if they are institutions controlled 
by small governmental jurisdictions (that are comprised of cities, 
counties, towns, townships, villages, LEAs, or special districts), with 
a population of less than 50,000. These regulations would affect all 
LEAs, including the estimated 17,371 LEAs that meet the definition of 
small entities. However, we have determined that the regulations would 
not have a significant economic impact on these small entities. As 
stated earlier, this regulatory action imposes no new net costs.

Paperwork Reduction Act of 1995

    This regulatory action does not contain any information collection 
requirements.

Intergovernmental Review

    This program is subject to Executive Order 12372 and the 
regulations in 34 CFR part 79. One of the objectives of the Executive 
order is to foster an intergovernmental partnership and a strengthened 
federalism. The Executive order relies on processes developed by State 
and local governments for coordination and review of proposed Federal 
financial assistance.
    This document provides early notification of the Department's 
specific plans and actions for this program.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to the program contact person 
listed under FOR FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access to the official edition of the Federal Register and the Code of 
Federal Regulations via the Federal Digital System at: www.gpo.gov/fdsys. At this site you can view this document, as well as all other 
documents of this Department published in the Federal Register, in text 
or Adobe Portable Document Format (PDF). To use PDF you must have Adobe 
Acrobat Reader, which is available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search

[[Page 31318]]

feature at: www.federalregister.gov. Specifically, through the advanced 
search feature at this site, you can limit your search to documents 
published by the Department.

List of Subjects in 34 CFR Part 300

    Administrative practice and procedure, Education of individuals 
with disabilities, Elementary and secondary education, Equal 
educational opportunity, Grant programs--education, Privacy, Private 
schools, Reporting and recordkeeping requirements.

    Accordingly, the date of compliance for recipients of Federal 
financial assistance to which the regulations published at 81 FR 92376 
(December 19, 2016) apply is delayed. Recipients of Federal financial 
assistance to which the regulations published at 81 FR 92376 apply must 
now comply with those regulations by July 1, 2020, except that States 
are not required to include children ages three through five in the 
calculations under Sec.  300.647(b)(3)(i) and (ii) until July 1, 2022.

    Dated: June 28, 2018.
Johnny W. Collett,
Assistant Secretary for Special Education and Rehabilitative Services.
[FR Doc. 2018-14374 Filed 6-29-18; 4:15 pm]
 BILLING CODE 4000-01-P