This paper describes options available to states for distributing funds for preschool education programs in light of the mandate of the Individuals with Disabilities Education Act that states must provide a free public education to children with disabilities, age 3 through 5 years. It begins with a general discussion of the different types of state funding formulas. A 1991 national survey is reported which found that 36 states used different funding formulas for distributing funds for preschool education than they used for distributing general or special education funds for school-age special education services. Following this, brief examples of funding formulas currently used by selected states for preschool programs are presented. These are: flat grant per child; flat grant per teacher/classroom unit; weighted pupil; and percentage of cost. Finally, some advantages and disadvantages of these different funding strategies are discussed. (DB)