No matter what the basis of allocation of federal aid funds, a primary goal of most proponents of federal grants to local school districts is an increase in district expenditures. A study of 706 school districts in California, accounting for 95 percent of the state's elementary and secondary students, shows that about 70 to 80 cents of every federal grant dollar covers expenditures that would not otherwise have been made by the district, while only 30 to 40 cents of each dollar of state grants goes toward such expenditures. Important factors in the difference between the use of federal funds and the use of state funds include the tying of federal funds to new and specialized programs and the reluctance of districts to base local budgets on the expectation of continued federal support. Analysis of available data also indicates that state aid is not so closely related to district wealth, as measured by property value, that the effects of each on spending are inseparable. Title I fund allocations, however, correlate so closely with the number of students from families receiving Aid For Dependent Children that it is impossible to isolate the effects of Title I money. (Author/PGD)