This paper explores the impact of the Kentucky Education Reform Act (KERA) of 1990 on the funding and allocation of resources to special education. Overall, the results indicate that the revenues generated for the special education system by KERA are approximately equal to marginal costs of special education services statewide. However, there is significant district-to-district variation in special education expenditures relative to revenues generated by KERA. Moreover, these patterns are related to student poverty, identification rates, and per capita income. While the overall funds generated have approximated costs by special education funding category, there is substantial variation in costs within funding categories that affect the equity of the system. However, district special education directors appear to favor the new system over the old system because of the increased flexibility for serving children, the reduced costs of fiscal audits, and the reduced incentives for placement. Individual chapters describe the Support Education Excellence in Kentucky (SEEK) Program, the study methodology, empirical results, policy implications of cost analysis, and perspectives on the special education funding system from sample local directors of special education. Appendices provide an explanation of the SEEK formula and estimated figures for tuition costs for out-of-district placements. (Contains 20 references.) (Author/DB)