As a result of state legislators' conviction that Chapter 1 fund mismanagement by the Chicago Public Schools had led to yearly increases in administration size to the detriment of students' real needs, the Chicago School Reform Act of 1988 placed a cap on noninstructional expenses and a progressive cessation on state aid to the poverty impaction element of Illinois' school aid formula. The corrective action required all but 5 percent of Chapter 1 funds to be spent only in schools. School funds have been reallocated to give teachers a 33 percent salary increase and to increase school-level staff while reducing administration size. Prior to reform, schools enrolling between 90 percent and 99 percent low income students received the least funding, while those with 100 percent and less than 30 percent received the most. Although the base level of funding is still far from equal, categorical programs can even out per pupil support so that Chapter 1 funding can have more compensatory effects. Continuing concerns in the arena of fund reallocation relate to the overall fiscal health of the Chicago Board of Education. Graphs and tables are provided to help illustrate funding and staffing changes. (16 references) (EJS)