The New York system of providing aid to contend with the higher costs associated with special education programs is the subject of this research study. The basic policy questions that it addresses are whether the current state aid system provides for special education needs for which the state should bear special responsibility and whether the manner in which the special needs of children are identified and measured for aid apportionment is equitable and promotes fiscal and educational efficiency. The term "special education" covers the mildly and severely handicapped, the gifted, and occupational and compensatory education. This paper is organized into four chapters: (1) the current fiscal and regulatory context in which special educational needs are aided in New York state's school finance system; (2) an examination of the pupil weighting system approach to providing aid for special needs programs; (3) alternative ways to measure school district needs for additional apportionment funds; and (4) a summary of the policy alternatives along with specific research recommendations. (Author/JK)