This paper summarizes results of a legislatively mandated study of the incidence of students with "severe and/or high cost" disabilities across California within the context of the new census-based funding approach (which distributes funds based on the overall census of school-aged children rather than a count of children receiving special education services). The study found that students with "severe and/or high cost" disabilities are not randomly distributed across school districts, thereby requiring development of an appropriate funding adjustment. A "severity service multiplier" was developed to allocate supplemental severity funding to some localities based on the characteristics and quantities of services received by their special education students. This approach was adopted by the California legislature and is now used as a severity adjustment to special education funding. The section following the introductory section considers the challenge of defining students with "severe and/or high cost" disabilities, two models for making this concept operational, analysis of the randomness of distributions of these students, and calculation of the severity service adjustment. A concluding section discusses the approach used and implications for other states. An appendix provides details on deriving special education cost estimates per student. (Contains 14 references.) (DB)