This study evaluated the relationship between Massachusetts special education expenditures and revenues and the overall allocation of school budgets between special and regular education. An introduction reviews the study's background, census-based funding in Massachusetts, education reform efforts in the state, the Foundation Budget approach which combines local community and state resources with the purpose of providing all schools with adequate and equitable education resources, and the current funding formula. The study analyzed quantitative data, including existing fiscal, student, staffing, and programmatic data from 81 schools in 25 school systems, as well as qualitative data, including interviews with the 25 special education directors. Major findings from the quantitative data are reported in text, tables, and graphs for: personnel expenditure allocation; per student personnel costs; allocation among special education services; costs of inclusion; and comparison of revenues and expenditures for special education. The interviews resulted in identification of policy issues and concerns about the following aspects of the existing formula provisions: flexibility, private residential funding, cost issues, percentage of students identified, types of placement, standard of service, and parental rights to independent assessment. Insufficient funding was the predominant concern expressed by the special education directors interviewed; however, essentially no desire for major changes in the current funding system was found. (DB)