This report presents an overview of the revised preschool funding formula under the 1997 amendments of the Individuals with Disabilities Education Act and perceptions of some state education agencies (SEA) staff on the initial impact of the funding changes. New features include a hold harmless base amount that is equal to the preschool grant received for fiscal year 1997. For new funds above 1997 allocations, a census factor and a poverty factor must be applied in establishing allocations. Information gathered from contacted SEA staff indicates reactions to the new components of the formula were mostly negative. Typical reactions included: (1) larger, wealthier local education agencies (LEAs) with the most resources often receive larger allocations; (2) increase in numbers of children served is no longer the basis of the formula, so the incentive to increase the number of identified preschoolers is removed; (3) the poverty factor has had a limited effect in shifting funds to urban areas; and (4) the allocation based on degree of poverty could result in an increase for poorer districts, but is too small a part of the total funds to be meaningful. The report concludes with a listing of related issues and recommendations for state action. (CR)