State Watchdog Calls Massachusetts Special Education Transportation Costs a National Outlier — and Warns Past Reform Recommendations Have Been Ignored
BOSTON - February 24 - The Massachusetts Office of the Inspector General released a sweeping study Tuesday concluding that the state’s own funding model is a primary driver of escalating special education transportation costs — and warning that four previous reports on the same problem over the past 20 years have largely been ignored. Inspector General Jeffrey Shapiro urged the Legislature, the Department of Elementary and Secondary Education (DESE), and local school districts to act on the study’s recommendations, imploring them not to let it “grace a shelf in the State Archives.”
The Full Story
For school business administrators and superintendents across Massachusetts — many of whom have watched special education transportation costs consume a growing share of their budgets — the new OIG study offers both validation and a sobering assessment. The 90-page report, mandated by the Legislature as part of the FY2025 supplemental budget, presents 17 findings and a series of concrete recommendations for how the state, districts, and DESE can work to bring costs under control. Critically, the OIG stops short of promising easy fixes, noting that transportation costs are “the final step in a complex special education system” anchored to student placements, not to budget convenience.
The numbers behind the study are stark. In FY24, Massachusetts school districts transported 61,996 students to special education programs at an average cost of $13,825 per student — compared to $1,045 per student for general education transportation. Out-of-district placements are the most expensive component: in the median district, just 17 out-of-district special education students accounted for 49% of total special education transportation costs. In the top quarter of districts, out-of-district transportation consumed 70% or more of special education transportation budgets. In FY22, the most recent year with national comparative data available, Massachusetts ranked fifth among all 50 states and the District of Columbia in per-pupil transportation spending.
Massachusetts also places students in out-of-district special education programs at nearly three times the national rate. In FY23, 6.1% of Massachusetts students with disabilities ages 5 to 21 were served in out-of-district placements, compared to a national average of 2.3%. The OIG acknowledges that this reflects the strength of the state’s special education system and its well-developed network of approved private and collaborative programs — but it also means the Commonwealth carries a disproportionately large transportation cost burden compared to other states.
The Circuit Breaker Problem
The report’s most significant systemic finding concerns the state’s “circuit breaker” reimbursement model. Massachusetts is one of only six states in the nation in which nearly all state funding for special education transportation is delivered through reimbursement rather than direct, same-year funding. Under this model, school districts must pay the full cost of special education transportation up front, then submit end-of-year reports to DESE and wait to be reimbursed — at a percentage determined by appropriation — in the following fiscal year.
The OIG identifies this delayed funding structure as inequitable, administratively burdensome, and uniquely problematic. Smaller districts with limited reserves are forced to carry large transportation costs for months before receiving any state reimbursement. The reimbursement rate itself is also subject to appropriation fluctuations: while the circuit breaker is designed to reimburse 75% of qualifying costs above a per-student threshold, in FY25, transportation reimbursement fell to just 61.36% after the Legislature failed to fully fund the circuit breaker at the statutory rate. Tuition and instruction costs were reimbursed at the full 75%, but transportation was not, leaving districts to absorb the difference. A supplemental budget proposal by Governor Healey would restore full reimbursement for FY25, but it remains under consideration at the State House.
The OIG also raises a more subtle concern: some districts reported an anecdotal belief among vendors that transportation pricing can be pushed higher because districts are ultimately reimbursed by the state. “Vendors are more willing to increase pricing due to their perception that transportation funding comes later from the state,” the report notes — a dynamic that the current reimbursement structure may inadvertently encourage. The OIG recommends the Legislature explore transitioning to a formula-driven funding model that eliminates the timing mismatch and removes cost controls that same-year funding would otherwise provide.
The Vendor Competition Crisis
Beyond the funding model, the OIG found that school transportation markets across Massachusetts are characterized by severely limited vendor competition — a problem the report describes as structural rather than regional. When the OIG surveyed districts statewide, 67% reported receiving zero or one bid in their most recent general education transportation procurement cycle, and 53% reported the same for special education. Across all survey responses, fewer than 20% of districts received more than two bids.
The report traces this problem partly to nationwide market consolidation. Four companies — First Student, National Express, Student Transportation of America, and Beacon Mobility — now control more than 50% of the national school transportation market, and the number of independent operators nationwide has declined by an average of 1.5% per year from 2005 to 2024. Districts in Massachusetts described a troubling pattern: multiple vendors attend pre-bid meetings to gauge whether the incumbent is still interested, and if the answer is yes, the others simply don’t submit bids. In some cases, multiple vendors who attend a pre-bid meeting are owned by the same parent company, meaning the appearance of competition masks what is effectively a single-bidder market.
The OIG also found that districts’ own procurement practices may be contributing to the problem. Contract specifications have grown increasingly complex over the years as districts have added new requirements in response to past audit findings or vendor disputes, often without analyzing the cost implications. High performance bond requirements — some set at 100% of annual contract value — can deter smaller regional operators from participating. Short bid response windows, sometimes as brief as three weeks, further limit the pool of potential respondents. The OIG recommends that districts review and simplify procurement specifications, extend response timelines, and calibrate performance bond and insurance requirements to the actual risk profile of the contract.
The Transparency Gap
A third major finding concerns the near-total absence of pricing transparency in the special education transportation market. Currently, Massachusetts law does not require transportation vendors to provide itemized invoices. Districts receive bills, but have limited ability to verify what they are paying for or compare pricing elements across vendors. The OIG recommends the Legislature enact statutory changes requiring vendors to break out labor, fuel, vehicle maintenance, insurance, and other costs at the bid, contract, and invoice stages.
Compounding this problem is the lack of any central repository for transportation bids and contracts. With roughly 396 school districts and 24 educational collaboratives all procuring similar services from the same vendors, each district largely operates blind to what neighboring communities are paying. Contracts between districts and vendors are public records, but because they are held by individual districts, accessing and comparing them requires substantial time and effort that most transportation administrators simply don’t have. The OIG recommends DESE create a publicly accessible, web-based repository of transportation bids, contracts, and licensed providers to help districts make more informed procurement decisions.
On Regionalization: Promising but Not a Cure-All
The Legislature specifically directed the OIG to examine whether regionalizing special education transportation could drive down costs. The report’s answer is nuanced. Regionalization has demonstrated value in specific contexts — the OIG points to the North River Collaborative and the LABBB Collaborative as two programs that emerged from a prior state-funded pilot and continue to operate successfully. The report notes that educational collaboratives are the most logical structures through which regional transportation arrangements can be built, and that some opportunities exist to expand collaborative transportation in targeted areas of the state.
However, the OIG is direct in its conclusion that regionalization is not a universal solution. Massachusetts is divided into many geographically small districts, many of which already transport students to programs spread across dozens of municipalities. The median district in fall 2024 was transporting students to out-of-district placements in 11 different communities, with the top quarter of districts serving 19 or more locations. Coordinating transportation across those complex, individualized route patterns is difficult even within a single district, let alone across multiple municipalities with different governance structures, collective bargaining agreements, and IEP timelines. The OIG further notes that regional districts — which might seem best positioned for collaborative transportation — actually tend to have higher median transportation costs than municipal districts, because they face more complex service demands.
A History of Ignored Recommendations
Perhaps the OIG’s most pointed observation is that none of this is new. The report documents that special education transportation costs have been formally studied at least four times in the past 20 years, including reviews by the State Auditor and a 2018 special legislative commission. Those studies produced numerous recommendations — many of which overlap with the OIG’s current findings. Most were never acted upon.
“I respectfully urge the Legislature, DESE, and local school districts to work together and not let this be one more study to simply grace a shelf in the State Archives,” Inspector General Shapiro wrote in his cover letter to legislative leaders and DESE Commissioner Pedro Martinez.
The OIG’s study is the first of three legislatively mandated reviews the office will conduct in FY2026. The others will examine sheriffs’ budget deficits and the bar advocate system.
Why It Matters
For school committees and administrators across the South Shore and across Massachusetts, this report is required reading. Special education transportation costs are a significant — and for many districts, growing — line item that directly compresses general education budgets, strains reserves, and in some cases drives budget override discussions. The OIG’s findings confirm what many finance directors have long suspected: the system is structurally stacked against districts. The circuit breaker reimbursement model forces districts to carry costs they can’t afford, the vendor market offers little competitive pressure to hold prices down, and there is virtually no publicly available information to help districts benchmark what they should be paying.
The recommendations — requiring detailed vendor invoices, building a contract database, reforming the circuit breaker model, simplifying procurement specifications, and expanding collaborative transportation where feasible — are achievable. Whether the Legislature and DESE act on them this time is the central question.
The full report is available on the Massachusetts Office of the Inspector General website.
Report Summary
Key Findings
Finding 1: Student IEP placement decisions, not transportation cost, drive service requirements — limiting districts’ ability to reduce costs through routing efficiencies.
Finding 2: A persistent shortage of qualified bus drivers has significantly increased transportation costs, with the national pool of school bus drivers declining 15.1% from 2019 to 2023.
Finding 3: 67% of Massachusetts districts received zero or one bid in their most recent general education procurement cycle; 53% for special education. Limited vendor competition is a statewide structural problem.
Finding 4: Overly complex procurement specifications, short bid windows, and high performance bond requirements deter competition and drive up vendor pricing.
Finding 5: There is no central repository for transportation contracts or bids, leaving districts to negotiate without knowledge of what neighboring communities are paying.
Finding 6: Massachusetts’s requirements for so-called “7D vehicles” used in special education transportation are a contributing cost factor.
Finding 7: Massachusetts is one of only six states using a reimbursement model for special education transportation funding. This circuit breaker model forces districts to front-load costs, creates funding uncertainty, and can be inequitable for districts with fewer financial resources.
Finding 8: The geographic dispersion of approved special education programs, combined with the one-hour ride limit, limits opportunities for economies of scale.
Findings 9–16: Regionalization reduces costs in specific contexts but is not broadly applicable; educational collaboratives are the most practical vehicle for regional transportation; abutting districts show significant cost disparities that suggest untapped coordination opportunities; a prior pilot produced successful collaborative programs (North River Collaborative, LABBB Collaborative) that were never scaled.
Finding 17: At least four prior studies over 20 years have examined the same issues and offered recommendations. Most were never acted upon.
Key Recommendations
For the Legislature: Reform the circuit breaker reimbursement model to reduce the timing mismatch and inequity of the current front-loaded system; enact statutory requirements for vendors to provide itemized cost breakdowns at bid, contract, and invoice stages.
For DESE: Create a central, publicly accessible web-based repository of transportation bids, contracts, and licensed vendor information to support more informed district procurement.
For School Districts: Review and simplify procurement specifications; extend bid response timelines; calibrate performance bond and insurance requirements appropriately; coordinate with neighboring districts and educational collaboratives where feasible; align procurement calendars to attract more vendor participation.
Key Data Points
FY24 average cost per special education transportation rider: $13,825
FY24 average cost per general education transportation rider: $1,045
FY24 total K-12 students transported: 434,888 general education; 61,996 special education
Massachusetts out-of-district placement rate: 6.1% vs. national average of 2.3%
FY25 special education transportation circuit breaker reimbursement rate: 61.36% (statutory rate: 75%)
Massachusetts state ranking for per-pupil transportation expenditure (FY22): 5th in the nation
What’s Next
The report has been submitted to the House and Senate Committees on Ways and Means and the Joint Committee on Education, as well as to DESE Commissioner Pedro Martinez and Governor Maura Healey’s office. Governor Healey has filed a supplemental budget proposal (H.5033) that would restore the circuit breaker reimbursement to the full 75% rate for both transportation and instruction costs for FY25; that proposal is currently pending before the Legislature. The OIG has indicated it will monitor follow-through on its recommendations. South Shore News has an upcoming feature about school transportation costs in general. Stay tuned.
Full report available at the Massachusetts Office of the Inspector General website.