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Bracing for Change: How Federal Restructuring Could Impact Special Needs Families in California

  • A.Y.Bassam & Co. LLP
  • Apr 9
  • 4 min read

Issue# 1120


As discussions around federal restructuring gain momentum, families of individuals with special needs face uncertainty about how federal policy and funding changes might impact essential services. The implications could be far-reaching in California, where hundreds of thousands of families rely on a mix of federal and state support for education, healthcare, and developmental programs.


Education: The IEP Process Under Pressure

The Individuals with Disabilities Education Act (IDEA) is a cornerstone of special education in the United States, ensuring students with disabilities receive a Free Appropriate Public Education (FAPE) through an Individualized Education Program (IEP). Currently funded in part by the federal government, any reduction or restructuring of this funding could have immediate and long-term impacts on special education services in California.


Potential outcomes include:

  • Increased caseloads for special education teachers and specialists

  • Delays in evaluations and IEP meetings

  • Reduction in services such as speech therapy, occupational therapy, and classroom aides

  • There is a more significant burden on parents to advocate through legal channels


Although California allocates significant state resources to education under Proposition 98, federal contributions are essential in ensuring adequate staffing and services. Without them, local education agencies may be forced to make difficult choices.


 

Healthcare: Medi-Cal and the Threat to Access

Medi-Cal, California’s version of Medicaid, provides health coverage to low-income families and individuals with disabilities. It is a lifeline for many special needs families, covering behavioral therapy, durable medical equipment, and in-home support.


Should the federal government reduce its share of Medicaid funding or transition to block grants, states like California would face difficult trade-offs. Possible consequences include:


  • Tighter eligibility requirements and more frequent redetermination

  • Service caps or waitlists for therapies like ABA and speech-language therapy

  • Lower provider reimbursement rates, potentially reducing provider participation

  • More significant pressure on state-funded alternatives, including Regional Centers and county health departments


Programs under California’s CalAIM initiative, which aims to improve care coordination and outcomes for Medi-Cal recipients, could serve as a framework for resilience. However, expanded implementation would require significant state investment without federal backing.


 

Programs and Services at Risk

A range of federally supported programs that serve people with disabilities could be impacted:


  • Supplemental Security Income (SSI): Many families depend on SSI to support their child's basic needs. Restructuring could mean more stringent income and asset tests.

  • Section 8 Housing Vouchers: These help low-income families, including those with disabled members, secure stable housing. Funding reductions could worsen California's already-strained housing system.

  • Vocational Rehabilitation Services: Programs that assist young adults with disabilities in transitioning into the workforce may face cuts, reducing opportunities for independence.

  • Developmental Disabilities Councils and IDEA Grants: These programs fund inclusive initiatives, family support efforts, and research.


Increased decentralization could also create inconsistencies in access and quality of services between states, disadvantaging families who move or live near state lines.


 

Tax Implications: Navigating a Shifting Financial Landscape

Many families may face increased out-of-pocket expenses if federal support is scaled back. It is crucial to understand the tax tools available:


  • Medical Expense Deductions: Families should track out-of-pocket expenses for therapies, travel, adaptive equipment, and specific educational costs. If these exceed a threshold of their Adjusted Gross Income (AGI), they may qualify for deductions.

  • 529A (ABLE) Accounts: These tax-advantaged savings accounts, including California’s CalABLE program, allow individuals with disabilities to save without jeopardizing benefits. Expanded use of these accounts can provide some financial flexibility.

  • Dependent Care Tax Credit: If a child with special needs requires care while parents work, qualifying expenses may be eligible for a tax credit.

  • Special Needs Trusts (SNTs): These legal instruments protect assets for individuals with disabilities while maintaining eligibility for means-tested programs. Changes in benefit eligibility rules might necessitate updates to existing trust arrangements.


Consulting with a tax advisor familiar with disability law is essential for planning around these evolving variables.


 

State-Level Resilience: Can California Fill the Gaps?

California supports individuals with disabilities through multiple programs and legislative protections. In the face of federal retrenchment, state-level responses could include:


  • Emergency legislative measures to stabilize funding for Medi-Cal and special education

  • Expansion of Regional Center services and CCS (California Children’s Services)

  • More excellent investment in CalAIM and related integrated care models

  • Public-private partnerships to offset lost federal funding


However, California’s ability to step in depends on budget priorities, economic conditions, and sustained political will.


 

What Can Families Do Now?


  • Stay informed by following state and federal policy developments

  • Engage in advocacy through local, state, and national organizations

  • Document your needs by keeping detailed records of services, expenses, and outcomes

  • Connect with community resources such as Family Resource Centers, legal aid groups, and nonprofit advocacy organizations

  • Plan financially with the help of special needs planners and tax professionals


 

Final Thoughts

The prospect of federal restructuring brings a wave of uncertainty, particularly for families navigating the complex systems that support individuals with disabilities. While California has a strong infrastructure and tradition of advocacy, a reduction in federal support would require a rapid and coordinated state response to prevent significant disruption.

Families should not wait for policy changes to begin preparing. Through awareness, advocacy, and proactive planning, they can build resilience in the face of whatever lies ahead.



Disclaimer: This blog post is for informational purposes only and does not constitute legal, financial, or medical advice. It is not a recommendation for any specific action. Families should consult qualified professionals to understand how potential policy changes may apply to their unique circumstances.

 
 
 

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