The opinion of the court was delivered by: Yvette Kane, Chief Judge
Plaintiffs, parents of students in Lancaster and Reading School Districts, bring this action of behalf of their minor children to challenge the method for delivering special education funds in Pennsylvania. They contend that 24 P.S. § 25-2509.5, the funding statute at issue, violates federal laws, specifically: the Individuals with Disabilities Education Act, 20 U.S.C. § 1400 et seq.; Section 504 of the Rehabilitation Act, 29 U.S.C. § 794; the Due Process Clause of the Fourteenth Amendment, U.S. Const. amend. XIV, § 1; the Equal Educational Opportunities Act of 1974, 20 U.S.C. § 1701 et seq.; and Title II of the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101 et seq. Defendants are the Pennsylvania Department of Education ("PDE"), the executive department of state government that oversees basic education and special education, and Gerald Zahorchak, the Secretary of the PDE. Now before the Court is Defendants' motion to dismiss Plaintiffs' amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (Doc. No. 11.) For the reasons that follow, the Court will deny Defendants' motion.
The Individuals with Disabilities Education Act ("IDEA") conditions a state's receipt of federal funds on the implementation of statewide special-education programs guaranteeing free appropriate public education ("FAPE") to eligible disabled children. 20 U.S.C. § 1412(a)(1)(A). Consistent with the IDEA, Pennsylvania provides funding to local school districts on an annual basis appropriated specifically for special education. It is 24 P.S. § 25-2509.5 that provides primary special-education funding to school districts. Plaintiffs allege that the statute implements a "funding formula" that requires the PDE to allocate special-education funds to a school district based on the district's overall average daily membership, or "ADM," rather than on the district's special-education needs or its ability to provide FAPE.
In addition to the formula, Plaintiffs allege that three other features of § 25-2509.5 limit the school districts' ability to provide FAPE. The first, a "hold harmless" provision, which first came into effect during the 1999-2000 school year,*fn1 guarantees that a school district does not receive less special-education funding than the year before. (Am. Compl. ¶ 15.) The effect of the provision, according to Plaintiffs, has been to lock in the inequities of the formula, creating "an inverse correlation between the number of special education students in a school district and the amount of state aid per student received by a school district." (Am. Compl. ¶¶ 16-17.) Moreover, Plaintiffs contend that the provision accounts for nearly 70% of total special-education funding. (Am. Compl. ¶ 16.) The second feature of concern to Plaintiffs is that the statute indirectly encourages school districts to place disabled children in highly segregated "approved private schools" by funding tuition subsidies through a separate funding statute. (Am. Compl. ¶¶ 21-22.) In other words, because school districts can separately account for private-school tuition subsidies, school districts have economic incentives to place children in restrictive private schools instead of using designated special-education funds. Finally, Plaintiffs allege that because many of the special-education students in the Lancaster and Reading School Districts are also in need of specialized bilingual education, the formula's failure to account for the students' unique needs has deprived them of FAPE.
In this action, Plaintiffs seek an injunction requiring the Pennsylvania Secretary of Education to abandon the current funding formula and to distribute special-education funds based upon the actual number of disabled students and the actual cost of their special-education needs. Plaintiffs also seek an appropriation of funds to the Reading and Lancaster School Districts in order to provide certain services in those districts. Defendants moved to dismiss the amended complaint on the grounds that Plaintiffs lack standing, failed to exhaust administrative remedies, and fail to state a claim upon which relief can be granted. (Doc. No. 11.) The parties subsequently briefed the motion and it is ripe for disposition. (Doc. Nos. 19, 22, 23, 28, 29.)
A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) is properly granted when, accepting all factual allegations and inferences as true, the moving party is entitled to judgment as a matter of law. Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990). Although the moving party bears the burden of showing that no claim has been stated, Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2007), the complaint must allege facts sufficient to "raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)," Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007) (internal citations omitted). In addition, although for the purposes of a motion to dismiss pursuant to Rule 12(b)(6) the Court must accept as true all factual allegations in the complaint, the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain, 478 U.S. 265, 286 (1986).
The Court will first address Defendants' argument that Plaintiffs lack standing to pursue their claims in this case. Standing, which serves to maintain the "critical balance of power between co-equal branches of government, and ensures that appointed judges do not usurp the rightful authority of duly elected representatives of the people," Common Cause of Pa. v. Pennsylvania, 447 F. Supp. 2d 415, 424 (M.D. Pa. 2006), requires the Court to consider "both [the] constitutional limitations on federal jurisdiction and prudential limitations on its exercise," Warth v. Seldin, 422 U.S. 490, 498 (1975).
To satisfy Article III's constitutional standing requirements, a plaintiff must show that a cognizable "case" or "controversy" exists. DaimlerChrysler Corp. v. Cuno, 126 S.Ct. 1854, 1860-61 (2006). The Supreme Court has interpreted the "irreducible constitutional minimum of standing" to require:
(1) that the plaintiff have suffered an "injury in fact"-an invasion of a judicially cognizable interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) that there be a causal connection between the injury and the conduct complained of-the injury must be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court; and (3) that it be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.
Bennett v. Spear, 520 U.S. 154, 167 (1997) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). The three elements of constitutional standing-injury in fact, causation, and likelihood of redressability-are "an indispensable part of the plaintiff's case, [and] each element must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation." Lujan, 504 U.S. at 561.*fn2 Accordingly, the Court will consider whether Plaintiffs have met each of the three constitutional standing requirements.
Under the first Article III standing requirement, a plaintiff must identify a legally cognizable injury. Subsumed within this requirement, the alleged injury must be both "actual or imminent, not conjectural or hypothetical" and "concrete and particularized."*fn3 Friends of the Earth, Inc. v. Laidlaw Environmental Servs. (TOC), Inc., 528 U.S. 167, 169 (2000); Danvers Motor Co., Inc. v. Ford Motor Co., 432 F.3d 286, 294 (3d Cir. 2005) ("Injury-in-fact is not Mount Everest."). In this case, Plaintiffs allege the denial of FAPE as a direct result of Pennsylvania's funding inequities. First, they allege that Defendants' implementation of the statutory formula "has caused a chronic lack of funds in Plaintiffs' districts and consequent systemic deficiencies in their special education and regular education programs" (Pls' Br. in Opp'n 7), which deprived Plaintiffs' children of the right to receive FAPE as guaranteed by the IDEA. Specifically, Plaintiffs assert that FAPE has been denied because the school districts cannot afford to provide essential special-education staff and programs, including tutoring, extended-school-year programs, and bilingual-education staff. Second, Plaintiffs allege that the funding formula has created incentives for school districts to identify fewer students as eligible for special education. (Am. Compl. ¶ 18.) Finally, Plaintiffs allege ...