Joshua Bright for The New York Times  A prekindergarten class at Bankstreet College of Education, in Manhattan.  New York City is paying private contractors more than $1 billion this year to operate a little-known special education program for 3- and 4-year-olds, nearly double the amount it paid six years ago.  The program serves 25,000 children with physical, learning, developmental and other disabilities. While the number of children in the program has risen slowly in recent years, annual costs have soared to about $40,000 per child, according to an analysis of city education spending by The New York Times.  The city pays private contractors to provide classes, as well as individual instruction at homes, day care centers and nursery schools. Children may also be prescribed speech, physical and occupational therapy in half-hour sessions, several times a week.  The prekindergarten program is far more expensive in New York than it is elsewhere, and oversight by the city and state has often been lax, according to interviews with officials, regulators and contractors.  Education and budget officials said they were alarmed by the costs, but maintained that lobbyists for private contractors had blocked efforts in Albany to curb spending.  The program, often referred to as special-ed pre-K, now accounts for about 6 percent of the city’s $19 billion education budget, the spending analysis showed.  “Certainly these children are deserving of services, but it’s a question of whether all this money is actually benefiting them or is being wasted on the contractors,” said Raymond J. Domanico, director of education research for the city’s Independent Budget Office.  City officials said some of the growth in spending stemmed from more awareness of autism: some special-ed pre-K students, for example, are receiving behavior-modification therapy as many as 35 hours a week, driving their costs as high as $200,000 a year. But the officials acknowledged that autism services accounted for only part of the increase.  When government auditors have delved into disclosure reports by contractors, they have routinely discovered irregularities.  Some contractors have billed the program for jewelry, expensive clothing, vacations to Mexico and spa trips to the Canyon Ranch resort, The Times found in a review of a decade’s worth of education, financial and court records. Others have hired relatives at inflated salaries or for no-show jobs, or funneled public money into expensive rents paid by their preschools to entities they control personally.  New audits by the state comptroller, Thomas P. DiNapoli — which focused on a dozen special-ed pre-K contractors, seven of them in New York City — have already led to a felony guilty plea by one Brooklyn contractor, and officials said more arrests were expected.  In New York State, overall spending on special education for 3- and 4-year-olds is expected to approach $2 billion in 2012, with the largest increase in recent years occurring in New York City, according to city and state records.  In most of the country, public school districts provide special-ed pre-K. New York is the only state that turns over the program to private contractors, many of which are for-profit companies. (The state’s program predates a 1986 federal law mandating special-ed pre-K, and New York always relied on contractors.)  The contractors often have a dual role: they evaluate children and identify disabilities, and then they deliver services, at costs that are higher than in other states, education experts said. Technically, city administrators choose which contractors provide services, but in practice, contractors acknowledge that they have significant influence over these decisions.  Under this structure, contractors have an incentive to inflate the number of services children require, said Julie Berry Cullen, an economist who has studied special-education spending.  “People who evaluate students say it’s an objective process,” she said. “But it’s not. It clearly responds to financial incentives.”  Records obtained by The Times under the state’s Freedom of Information Law showed that 83 percent of the contractors that evaluated children in the program since 2003 went on to teach those same pupils.  Steve Albert, who oversees special-ed pre-K for the city’s Education Department, acknowledged that the program was expensive, but said that it worked.
The cost of New York Cityâs special education prekindergarten program has nearly doubled in six years, and governmental oversight of the contractors running it has often been lax.