Despite scrutiny, special education money flows to for-profit residential treatment centers

An Associated Press investigation found that for-profit residential treatment centers in the U.S. are tapping into taxpayer-funded special education money for students with disabilities, despite growing concerns over their safety and lack of oversight. These centers, part of the so-called troubled teen industry, operate under fragmented regulations, securing contracts with individual school districts and enrolling out-of-state students to bypass scrutiny. A 2022 study commissioned by California legislators revealed that only half of U.S. states require certification for these facilities, and most lack onsite inspections or standards for building codes and staff background checks. The Individuals with Disabilities Education Act (IDEA) allows special education funds to cover residential placements, but responsibility for oversight falls to local school districts, which often lack monitoring systems. Colorado and Maine confirmed they do not track students sent out of state, while most states reported no oversight of private residential programs. For example, Calo Programs in Lake Ozarks, Missouri, treats children from 30 states, including 24 funded by California and Illinois in 2025, while Missouri placed only two in-state students there in the past decade. The center defended its practices, citing district contracts and willingness for external oversight. Experts warn that a lack of standardized rules enables exploitation. Meg Appelgate, CEO of the nonprofit Unsilenced, criticized the system’s gaps, including approval processes and transparency for abuse allegations. Jennifer Rodriguez of the Youth Law Center highlighted California’s struggle, where hundreds of vulnerable children remain at risk due to loopholes in special education funding. While California banned adoption subsidies for out-of-state facilities last year, foster care funds still authorize such placements, leaving critical oversight gaps. The investigation underscores systemic weaknesses in special education funding, where for-profit centers profit from a catch-all disability category and rely on educational consultants to secure business. State policies often focus solely on academic concerns, ignoring safety and regulatory standards. The fractured bureaucracy allows these centers to operate with minimal accountability, leaving children and families vulnerable to unchecked practices.