The justifications for substantial additional federal funding which were persuasive toward the passage of the Elementary and Secondary Education Act (ESEA) are even more compelling today as cutbacks in educational services occur across the nation. Since 1971 there have been widespread changes in state systems of school finance as a result of pressures for property tax relief and more equality in educational expenditures. The categorical approach of federal financial assistance provided primarily through ESEA has permitted relative concentration of federal expenditures where the need is greatest; it has provided for a greater equalization of intrastate per pupil expenditures directly and also indirectly by stimulating reform at the state level; and finally, it has helped to stimulate the identification of specific educational needs. The complexities of school finance, however, and the variability of local conditions suggest there is no one best way to channel funds to all school districts. (DS)