This paper describes the current status of state poverty-based education funding programs, discussing how to implement or improve them. Researchers surveyed education finance officials in the 49 states with multiple school districts. Results indicate that 38 states currently distribute some education funds on the basis of poverty. A total of 75 programs in those states distributed $8.7 billion to schools in 2001-2002. Over 80 percent of the programs were first implemented in their current form since 1990, indicating active interest among state policymakers to provide adequate funding for school districts serving poor children. State poverty-based education funding programs vary significantly by size, focus, and funding method. Rather than developing new processes for gathering student poverty data, every state piggybacks on means-tested federal programs to estimate the number of low-income children in each school or district. Many states target poverty-based education funds to districts with larger number of poor students. Some attach strings to poverty-based funding (e.g., restricting grants for specific purposes). The overall level of commitment to poverty-based funding varies significantly among the states. Suggestions for state policymakers include providing funding that adequately reflects the cost of educating low-income children and targeting funding to high-poverty districts. (SM)