This policy brief explores issues associated with the question of whether federal funds to implement the Individuals with Disabilities Education Act (IDEA) should be allocated on the basis of the number of children with disabilities or a percentage of each state's resident population of children. The report examines proposed changes in the federal formula (supporting and opposing positions), the projected impact of a formula change, impact on identification and services, and other potential adjustments to the formula. It notes a movement toward a census-based formula in the face of the sentiment that IDEA is overregulated and underfunded. Supporting arguments suggest that the census-based approach would create incentives for states to undertake reforms such as prereferral and early intervention and provide disincentives for over representation of minorities in special education. Among opposing arguments are that a formula change would penalize states which have worked diligently to identify and serve all students with disabilities. Analysis of projected impact indicates that the new formula would result in 13 states (such as Florida and Massachusetts) losing more than $2 million, with other states (such as California, Idaho, and Arizona) experiencing an increase of more than 13 percent. A graph provides comparative figures for each state. (Contains 13 references.) (DB)