A new report that raises questions about the transparency of special-education funding and argues there are "strong disincentives" for moving disabled students into general-education classrooms will be used as a guidebook for making big changes through the coming year as to how special-education services are administered, state officials said.

At a legislative briefing on the issue Monday, state Schools Superintendent Kathryn Matayoshi said the time is ripe — six years after federal court oversight of Hawaii’s special-education system was lifted — for an overhaul of services that would focus on improving quality, bringing down costs and ensuring students with learning disabilities are placed in general-education classrooms for more of their school day.

"I think the issue for us has been, Where do we go from here? How do we continually improve the effectiveness of services to support students?" Mata- yoshi told lawmakers. "We want to move quickly to improve services, but I think we have to (also) move cautiously."

The report, commissioned by the state for $435,000, was aimed at identifying problems and offering recommendations for improving a special-education system that accounts for more than one-fifth of the Department of Education’s $1.3 billion general fund budget, serves more than 17,000 students and employs more than 2,200 teachers and thousands more education assistants, skills trainers, behavioral health specialists and others.

Special-education advocates and parents applauded the department’s interest in improving services but added stakeholders should be brought into discussions early and that services need to have a strong monitoring arm.

"I’m going to be curious about how they (the report’s recommendations) are going to be implemented," said Ivalee Sinclair, chairwoman of the Special Education Advisory Council, adding that the report’s findings were not surprising.

The WestEd Center for Prevention and Early Intervention, based in Sacramento, Calif., conducted the special-education study and will continue to work with the department in the coming year — at a cost of $512,500 — to implement recommendations and identify opportunities for improving services.

According to the WestEd report, among the biggest issues facing the department are:

» Current funding and staff allocation formulas, which are tied to special-education pupil counts, that promote "strong disincentives" to move special-education students to general education.

» Organizational structures and roles that are confusing, and a statewide system that makes it difficult to find "clear lines of responsibility and accountability" for special-education services.

» Big variations, school complex to complex, in the amount and type of staffing and consistency of special-education services.

» Costs for sending special-education students to private schools because their needs cannot be met at public schools. Though only a small number of special-education students are placed in private schools, those costs represent a "disproportionately high percentage of the state’s special education expenditures," the report said.

» Special-education costs that are difficult to analyze because of multiple funding "codes" for special-education services in the department’s budget.

» Performance levels for special-education students that continue to be far below adequate yearly progress targets. Special-needs students have also not seen overall improvements, as general-education students have.

» Parents who have difficulty navigating the process, and "desire assistance to understand and participate" in ensuring their children are getting adequate special-education services.

THE REPORT’S recommendations for improving services include working closer with stakeholders and schools to identify excellent programs and making lines of funding and responsibility clearer.

Jannelle Kubinec, a program director at WestEd, told members of the Senate and House Education committees on Monday that the department needs to ensure that schools are accountable for decisions made to educational plans for special-needs students.

The statewide school district model "lack(s) a bottom line for local practice," she said, making the example that principals can make special-education decisions without worrying about funding or other implications.

THE REPORT also highlights the amount of time special-education students spend in general-education classrooms as a significant barrier to improving student achievement.

Some schools have opted to move to full inclusion — putting almost all special-education students, except those with the highest needs, in general-education classrooms. But overall, Hawaii has the lowest rate in the nation for the time special-needs students spend in general-education classrooms.

In 2008, 85 percent of Hawaii students with disabilities from 6 to 21 years old were pulled from general-education classes for one-fifth of their school day or more, compared with about 50 percent nationally, federal statistics show.

Federal law requires that special-education students are placed in the "least restrictive environment." And for some youths, especially those who pose a harm to themselves or others, that environment is a classroom separate from other kids.

The more difficult question for Hawaii schools has been determining how often youths with fewer needs should be pulled from general-education classrooms. Some argue tailored instruction for special-needs youth outside of general-education environments can be beneficial, but others argue that "full inclusion" offers access to more rigorous standards.

Matayoshi said the state is interested in moving more special-needs students into general-education classrooms as part of larger education reforms, and said such a policy will require changing plenty of attitudes and opinions at the school level.

"There needs to be a time spent on really talking about the advantages of inclusion," she said.

At the briefing, Sen. Jill Tokuda, chairwoman of the Senate Education Committee, said Hawaii’s inclusion track record is a remnant of the Felix consent decree, when the state was trying to offer a lot of services to special-needs students, even if they didn’t necessarily need them.

"After Felix … there was a rush to provide any and all services a child may be eligible for," Tokuda said. "We’ve just dumped everything we can on the child and hoped for the best."

The state’s budget for special education ballooned under "Felix" federal oversight, though it has leveled off. Spending hit $542 million in the 2008-09 school year but dropped to about $500 million in the 2009-10 school year. The bulk of that funding is for personnel.

The Felix consent decree stemmed from a 1993 class-action lawsuit for special-education children in Hawaii filed on behalf of Jennifer Felix, who was a special-needs student on Maui.