SAN FRANCISCO — In a landscape where schools are increasingly pressured to meet specialized needs, for‑profit residential facilities in the troubled‑teen industry have found a lucrative loophole: the catch‑all special‑education funds meant for students with disabilities.
The Individuals with Disabilities Education Act (IDEA) allows states to allocate tax dollars to support extraordinary instructional services under an Individualized Education Program (IEP). Those funds are supposed to stay within the local public‑school ecosystem, yet many private centers quietly secure contracts with school districts, claim IEP funds, and locate homes for students high‑flying across state lines.
Overwhelmingly, the federal system outsources accountability. When the Associated Press knocked on doors of all 50 state education departments, officials said that local districts bear primary responsibility for how special‑education money is used. Only a handful of states claim to oversee private placements. Even those that do, such as Colorado and Maine, report not tracking students once they cross state borders.
California’s situation exemplifies the fragility of the system. A 2022 state‑led audit found that half of all states lacked a certification process for private residential placements; most only required educational reviews, not building codes or padded staff‑background checks. In 2025, California’s special‑education funds paid for at least 24 students to attend Calo Programs in Lake Ozarks, Missouri – a facility that claims to have served children from 30 states. Deputies at the Missouri Department of Elementary and Secondary Education noted only two in‑state students received placements there over a decade.
“Children enter and exit these institutions frequently,” said Maine Department spokesperson Chloe Teboe, reflecting how lapses in tracking create a safety net for the industry. The IEP “emotional disturbance” category is so broad it can cover anything from severe depression to mild behavioral outbursts. Special‑education professors warn that the label is often over‑used, erasing the nuance of genuine medical diagnoses.
In 2021 Oregon Senator Sara Gelser‑Blouin pioneered the country’s first registry for educational consultants working with private schools. A 2023 law that bans companies from receiving pay from consultants was met with fierce opposition by the industry. Calo’s parent company, Embark Behavioral Health, argued that without consultants, they would “go out of business,” a claim the company denied. “We don’t have any financial relationship with consultants,” Calo said, but the industry’s web of influence remains heavy.
People on the front line, such as educational consultant Imy Wax, note that families growing wary of price hikes for placements are turning more aggressively to school systems for IEP dollars. One mother in a recent California case described being pressured by a school district to sign a contract with a private center, even though she could not verify that the facility met local safety standards.
The result is a “big racket,” according to analysts and parents alike. Half the children in the U.S. the size of school districts receive funds that are channeled to for‑profit companies— companies that thrive on a fractured bureaucracy that leaves scant room for meaningful oversight. Until federal accountability frameworks are tightened, students will remain the most vulnerable participants in an industry she “refuses to look at.”
The Individuals with Disabilities Education Act (IDEA) allows states to allocate tax dollars to support extraordinary instructional services under an Individualized Education Program (IEP). Those funds are supposed to stay within the local public‑school ecosystem, yet many private centers quietly secure contracts with school districts, claim IEP funds, and locate homes for students high‑flying across state lines.
Overwhelmingly, the federal system outsources accountability. When the Associated Press knocked on doors of all 50 state education departments, officials said that local districts bear primary responsibility for how special‑education money is used. Only a handful of states claim to oversee private placements. Even those that do, such as Colorado and Maine, report not tracking students once they cross state borders.
California’s situation exemplifies the fragility of the system. A 2022 state‑led audit found that half of all states lacked a certification process for private residential placements; most only required educational reviews, not building codes or padded staff‑background checks. In 2025, California’s special‑education funds paid for at least 24 students to attend Calo Programs in Lake Ozarks, Missouri – a facility that claims to have served children from 30 states. Deputies at the Missouri Department of Elementary and Secondary Education noted only two in‑state students received placements there over a decade.
“Children enter and exit these institutions frequently,” said Maine Department spokesperson Chloe Teboe, reflecting how lapses in tracking create a safety net for the industry. The IEP “emotional disturbance” category is so broad it can cover anything from severe depression to mild behavioral outbursts. Special‑education professors warn that the label is often over‑used, erasing the nuance of genuine medical diagnoses.
In 2021 Oregon Senator Sara Gelser‑Blouin pioneered the country’s first registry for educational consultants working with private schools. A 2023 law that bans companies from receiving pay from consultants was met with fierce opposition by the industry. Calo’s parent company, Embark Behavioral Health, argued that without consultants, they would “go out of business,” a claim the company denied. “We don’t have any financial relationship with consultants,” Calo said, but the industry’s web of influence remains heavy.
People on the front line, such as educational consultant Imy Wax, note that families growing wary of price hikes for placements are turning more aggressively to school systems for IEP dollars. One mother in a recent California case described being pressured by a school district to sign a contract with a private center, even though she could not verify that the facility met local safety standards.
The result is a “big racket,” according to analysts and parents alike. Half the children in the U.S. the size of school districts receive funds that are channeled to for‑profit companies— companies that thrive on a fractured bureaucracy that leaves scant room for meaningful oversight. Until federal accountability frameworks are tightened, students will remain the most vulnerable participants in an industry she “refuses to look at.”
