This policy brief addresses the issue of issue of whether or not current federal funding policy under the Individuals with Disabilities Education Act (IDEA) should be changed from an identification system to an overall population-based system. The current federal funding policy is described, in the context of the legislative history of IDEA. Arguments for change include: working outside special education is more cost-effective; some students may be better served outside special education; over-identification is now a major issue; and procedural safeguards would remain in place with a population-based system. Arguments against change include: the system would not be fair to states and districts with higher incidence rates; procedural safeguards cannot be maintained if students are not identified; a retreat from the traditional federal role of fostering and promoting special education services would occur; fiscal accountability would be jeopardized; and current levels of special education funding would be threatened. Implementation issues are also addressed. Among these are whether or not the expenditure of funds should be limited and whether states and districts should be "held harmless." Other adjustments to federal funding policy considered are cost-based adjustments and need-based adjustments. The paper proposes that selected states be granted waivers when making specific reform efforts. (Contains 11 references.) (DB)