Council leaders have issued a stark warning that they do not have enough money to meet the needs of thousands of Norfolk children with special educational needs and disabilities.
Norfolk County Council branded the system "broken", as its spending spirals by millions of pounds amid rising need and a 17pc increase in referrals to special schools.
The warning comes despite the Conservative-controlled council having signed up to a government-bankrolled scheme in a bid to better control spending.
The council is pleading for the government to urgently reform the system - and to write off a £115m debt, but critics said the authority should have had a strategy to tackle the issue years ago.
A report to go before the council's cabinet next month reveals the ring-fenced schools budget - the Dedicated Schools Grant (DSG) - is being overspent.
For 2023/24, £43.1m was spent, £15.4m above the budgeted deficit of £27.7m.
The council said the bulk of that was due to demand from mainstream schools for 'top-up' funding to help meet needs of special educational needs and disabilities (SEND) children.
The council already had an £81.5m deficit in that budget, and it is forecast to hit £115m by March next year. It is not clear how that debt will be repaid.
Andrew Jamieson, deputy leader of Norfolk County Council, said: "There is now national recognition that the education system for children with SEND is broken.
"It is not delivering the best outcomes for children and the current budget set by the government is totally insufficient to meet the needs of our children.
"This has created a significant debt that should sit with the government and not councils. It is not of our making and needs to be written off by government."
Mr Jamieson said the council has spent £120m to create more than 2,000 extra specialist places, including in newly built special schools.
The council signed a "safety valve" agreement with the government in March last year, getting £70m for education services and support for SEND children up until 2029.
The bailout was to cover the deficit the council accrued amid a rising number of children needing specialist provision or extra support at school, and the increasing complexity of needs.
But, just a few months after the agreement was signed, the council told the Department for Education (DfE) its scheme was "off track". The agreement is now being renegotiated.
In June, the council told schools it would need to adjust SEND top-up funding allocations over the next two terms to remain within budget.
While the council is increasing the amount available from £30m to £35m, that is a lower rate than schools expected.
The trusts, which run more than 100 county schools, said it could trigger "significant redundancies" and a spike in exclusions of children.
Brian Watkins, leader of the Liberal Democrat group at County Hall, said: "SEND provision in Norfolk has been faltering for years, the costs incurred from tribunal cases, totalling almost £1m are evidence.
The Liberal Democrats have been vocal in their calls for immediate reform, including the establishment of a national body for SEND to oversee spending and outcomes.
"It is welcome to see this Conservative administration finally recognise the current system is broken, but their inability to address issues, nationally and locally, for the last decade is indicative of how out of touch they are."
Mike Smith-Clare, deputy leader of the Labour group, said: "This is a dire situation for families who have repeatedly expressed concerns at a lack of support and understanding.
"The needs of children have not been prioritised in terms of strategic planning or finance input - and this is now all too painfully clear to see."
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