In New York City, approximately 135,000 students are enrolled in full-time or part-time special education programs, almost 20,000 of whom are students with severe and profound disabilities. BOE spends over $2.5 billion annually, more than 25% of its total budget, on special education. Applicable Federal and State laws require each school district to provide a continuum of educational services for [187 [187 Misc.2d Misc.2d 95] 95] students who have been recommended for special education services. The services on the continuum range from those that are "less restrictive" (i.e., involve contact with students who are not disabled) to those which are "more restrictive" (i.e., involve less contact with students who are not disabled). By State and Federal law special education students should be educated to the greatest extent possible in the least restrictive environment. A recent task force convened by Mayor Giuliani, which included then City Schools Chancellor Rudy Crew, concluded that "tens of thousands" of students who are not disabled are placed in special education classes in New York City. Studies conducted in the early 1990's in part by one of plaintiffs' experts, Dr. Mark Alter, 42 found that more than 80% of students classified by the City's special education system as learning disabled did not meet the threshold criteria for learning disability. The overplacement in special education of students erroneously classified as learning disabled is significant because approximately 59% of all special education students are so classified. Compared to the rest of the State and to the rest of the Nation, New York City's public schools have a higher proportion of special education students enrolled in separate classes or in programs in separate educational settings—in other words, in the more restricted end of the placement continuum. According to the most recent SED annual report, 58% of the City's special education children are in restrictive placements. Such placements are expensive and often can cause inappropriately referred students tangible educational harm. The evidence demonstrates that the primary causes of New York City's overreferral and overplacement in restrictive settings are a lack of support services in general education and State aid incentives that tended until recently to encourage restrictive placements. With respect to State aid, the State funding formula was amended in 1999 to provide greater financial incentives to place students in less restrictive settings. However, it remains true that the disproportionate number of New York City students placed in special education is directly related to the lack of educational and support services in the general education environment. This finding has consistently [187 [187 Misc.2d Misc.2d 96] 96] been reaffirmed by SED and BOE studies. Defendants cite a portion of a study conducted by Dr. Alter which appears to reach the opposite conclusion. Properly placed in context the passages relied upon by defendants do not support their argument. The cause of overreferral is not hard to trace: given large class sizes in general education and comparatively smaller class sizes in special education, teachers and parents who believe a student's learning needs are not being met in general education will often attempt to obtain more individualized instruction by referral to special education. Placement in special education for these children is facilitated by the flexible definition of "learning disability" under applicable State regulations. The fiscal implications of overreferral and overplacement are significant. According to BOE documents, the budgeted cost of educating even a part-time special education student in 1998-1999 was approximately twice the cost for a general education student ($14,405 vs. $7,225). The average budgeted cost to serve a full-time special education student ($24,313) was over three times the general education cost. These numbers suggest the potential for significant cost savings. Defendants' expert, Dr. Daniel Reschley, Chairman of the Department of Special Education at Peabody College at Vanderbilt University, conducted studies which generally support the conclusion that special education reform could save significant amounts of money. Dr. Reschley testified that, even without reducing the total number of students receiving special education services, BOE would reduce its annual expenditures by $300 to $335 million if students with disabilities were placed in less restrictive settings according to the national average. Once these figures are adjusted for the reduction in State reimbursement that would occur, the BOE could still save somewhere between $105 to $185 million per year, depending on the assumptions made. Additional savings would be realized by moving students out of special education entirely. Plaintiffs point out that BOE has recently taken steps to decrease the overreferral of students to special education, and the overplacement of special education students in restrictive settings. Plaintiffs assert that students removed from special education will continue to have problems that will have to be addressed by services in addition to those currently available in general education classes. Plaintiffs are correct that the cost savings projected by defendants would be offset by the cost of providing to students [187 [187 Misc.2d Misc.2d 97] 97] removed from special education an array of necessary educational and support services in general education. Additional preventive resources would be necessary to staunch the flow of inappropriate referrals to special education. Finally, special education currently has several significant deficiencies that will cost money to fix, such as too large class sizes and too many uncertified teachers. New and successful models of least restrictive placements have also proven to be expensive. Despite these offsets, the evidence introduced at trial indicates that tens of millions of dollars annually could be saved by special education reforms. The evidence concerning cost savings above that range is equivocal. 2. Defendants' Assertions Regarding the City Defendants correctly point out that the City, despite a higher proportion of at-risk students, spends substantially less on education than other localities around the State. Defendants' expert, Dr. Michael Wolkoff, Deputy Chairman of the Department of Economics at the University of Rochester, provided data tending to show that New York City's effort has lagged behind that of other districts in the State at least since 1991. In 1996-1997, the latest year for which comparative data are available, New York City raised only about $4,000 per pupil from local resources, while school districts in the rest of the State raised on average about $6,200. Dr. Wolkoff testified that New York City's local education contribution per student is exceeded by every member of the wealthiest quartile of districts, by nearly every district in New York City's own quartile (the second wealthiest), by many districts in the second poorest quartile and even by one district in the poorest quartile.