A new formula proposed for categorically funding local education programs in Illinois can channel more money into programs for excellence than can general purpose grants. The formula, which would provide venture capital to stimulate local initiatives, would depend on district plans for using the money to improve instruction and on distribution of monies according to an equalization formula. By thus balancing the grants awarded against the district income, the state would allot grants by multiplying a constant ($250) times the ratio of district personal incomes per pupil (DI) over state average income per pupil (SI), with this total multiplied by a district's weighted average daily attendance (WADA) and a constant equalization factor: G=$250 (1-.80 DI/SI) WADA. Appropriate programs fundable under such grants would include master teaching projects, technology for lower-income school districts, and projects to improve classroom conditions. With suitable legislative safeguards, this formula should help attain excellence without thwarting equity goals. (JW)