This final report discusses the findings of a study that investigated the extent to which severe and/or high cost disabilities are evenly or unevenly distributed among the population of special education local plan areas (SELPAs) in California, and if the population-based special education funding formula should be adjusted. Results of the study found that severe and/or high cost students are not randomly distributed throughout the state. As the basis for adjusting the funding formula accordingly, a "severity service multiplier" was created for each SELPA based on the characteristics and services received by special education students residing in their attendance areas. This index indicates SELPAs with responsibilities for disproportionate numbers of severe and/or high cost students. Supplemental funding allowances were calculated for some SELPAs based on their severity service multiplier in relation to the state average, their overall average daily attendance funded rate, their total average daily attendance count, and other factors. Based on this analysis, it is estimated that the cost of fully implementing the severity service multiplier in the first year would be approximately $57 million. This cost estimate would represent supplemental state special education funding in the first year of about 1.5 percent. (Contains 18 references and 22 appendixes of research data.) (CR)