Least Restrictive Environment (LRE) is a measure built into IDEA that protects a disabled student's right to receive an education with non-disabled students whenever possible. Essentially, the student should be placed in as close to a regular setting as possible. Sometimes the least restrictive setting that is appropriate is a very restrictive setting. For instance, a high school aged student with with severe mental retardation coupled with numerous physical impairments might be best served in a separate school designed to help prepare this student to live as independently as possible. That's pretty restrictive because there are no non-disabled peers in that setting but it's probably appropriate.
Just as LRE is sometimes MCE it is also LEE - Least Expensive Environment. The district office has denied a transportation request for cab service for a student for whom we have serious safety concerns. They say it's because they are concerned that it's too restrictive and there is no data to back it up - which, by the way, is false. It seems to me that it's much cheaper to plead LRE in this case than to pony up the dough to get this kid to school in the way that is safest. If, as a parent, I knew what the situation with this students was, I wouldn't let my child ride that bus.
Update 11/20/06: This student called the bus driver a terrible name, called all the kids on the bus the same name, was reportedly harassing a female student and was reassigned to the mini-bus. Two weeks later we got a risk assessment report back from an outside agency that recommends that this student NOT attend the home school due to the high risk factor. This student has since been placed in a private therapeutic setting.