Latrobe Special Developmental School and Traralgon Secondary College will remain as separate campuses, following an announcement from the State Government promising funding to upgrade both schools.
Eastern Victoria MP Harriet Shing says the decision not to merge the schools was made after community consultation.
The ruling follows lobbying by parents of children at the Development School to keep its campus as a stand alone site.
Six million dollars of funding for the schools has already been promised by the Victorian Government.
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