OXFORD – SAD 17 stands to lose as much as $450,000 over the next fiscal year under new Medicaid regulation changes, Special Education Director Marcye Gray told school board members Monday night. That will affect services for special needs children.

“Needless to say it is extraordinarily worrisome,” Gray said.

SAD 17 provides 470 children with special needs services.

The federal Centers for Medicaid and Medicare Services plans to adopt five rule changes that eliminate federal money that has supported health care services for the elderly, people with developmental disabilities, school-age children and people with mental illnesses.

For SAD 17 and others, the new regulations would impact federal reimbursement for special education services such as physical therapy, occupational therapy, mental health services and some transportation costs for children going to therapeutic programs.

“It has an extraordinary impact for our children with disabilities and their families all the way from birth up,” Gray said.

The total fiscal impact to the state general fund for fiscal years 2008 and 2009 is $45 million, according to information from the state Department of Education. The total fiscal impact to communities, including nonprofit providers and schools, is $141 million.

Gray said it is unclear now how the regulations will play out, but there is discussion on the state level about shifting some of the lost revenue from another account.

“But we don’t know where the state will make that (money loss) up,” Gray said.

Although a two-year moratorium was supposed to have been enacted, President George Bush vetoed that moratorium, and unless the Senate votes to override it, school districts are faced with the consequences as early as March 1.

If the district must absorb the loss, Gray told directors it likely means a reduction in programming or the cost will have to be picked up in town budgets.

Under the current situation, the district will have to absorb about $40,000 by March 1 in this year’s budget with the remaining $400,000 coming out of the next year’s budget that starts July 1.

Budget Committee members, who thought they had two years to deal with the situation, will now have to plan for the loss quickly.

“The bottom line is we’re still required to provide the services,” Gray said.

In a statement last week, Department of Education Commissioner Susan Gendron also expressed her concern about the situation, saying “Federal law rightly requires schools to provide rehabilitation services, such as occupational therapy, physical therapy and speech therapy, that are necessary for students with special needs to be able to access an appropriate education. In fact, federal law even requires us to maximize all revenue sources, including the federal government, to make those services available. Now we are being told that Medicaid will no longer fund some of those services that are required.”

Superintendent Mark Eastman said as the situation changes he will keep the board apprised.