Increased demand from children and young people with special education needs and disabilities (SEND) means that councils face a funding shortfall of £536m this year in providing services for the group.
The estimate is included in a new report produced by the Local Government Association, based on a survey of 73 authorities – half of those with SEND duties.
The association said that results mean councils are at risk of failing to meet their statutory duties, and that children with SEND could miss out on mainstream education.
Anntoinette Bramble, chair of the LGA’s Children and Young People Board, said: “Councils have pulled out all the stops…but are reaching the point where the money is simply not there to keep up with demand.
“Schools are also being pushed to the brink by the underfunding of SEND, at a time when there is already severe pressure on general schools funding.
“This risks creating a perfect storm, where not only does this mean schools can’t provide the extra support pupils with SEND need, but it means other pupils and teachers suffer the consequences of funding being squeezed on a daily basis, by not getting the support in the classroom that they need.”
The LGA report, being launched today at the National Children and Adult Services Conference in Manchester, found that the projected shortfall is double the gap they faced last year.
It cited government figures which show the number of children and young people with Education, Health and Care Plans (EHCPs) or statements, which detail the support a child with SEND receives, has increased by 35% in five years, from 237,111 in 2013/14 to 319,819 in 2017/18.
In addition, the number of children and young people educated in special schools and specialist colleges has risen by 24% during the same period, from 105,442 in 2013/14 to 131,230 in 2017/18.
The LGA said the increase was due to population growth, growing expectations among parents and core funding pressures on mainstream schools.
Its research showed that councils have overspent their allocated budgets for children with SEND, known as the High Needs Block, for the last four years.
This has seen them “top up” budgets with funding from elsewhere such as from general schools budgets.
However, the flexibility to transfer funding has now been restricted by central government, which the LGA says is putting further pressure on councils.
Bramble called on the government to address the issue in next month’s local government finance settlement.
In November last year, the government announced a package of support worth nearly £45 million to provide additional help for children with SEND.
The money, distributed through a section 31 grant, was not ring fenced and included cash to help implement reforms.
However, in June this year, a group of education unions and 39 local authorities wrote to the government warning they don’t have enough cash to meet their statutory obligations for SEND children.
They said: ‘The government’s recent cash injection for SEND does not introduce any new money into local authority budgets and this will not solve the long term challenges local authorities and schools face in delivering effective SEND provision.”
