How a state chooses to design its system of funding schools is ultimately a question of education governance, determining who--state policymakers, school districts, or school principals--gets to make the decisions about how and where funding is spent. States have two primary ways of funding schools: the foundation, or base funding that is intended to cover the basic costs of education (teacher salaries, textbooks, materials, and more); and categorical funding targeted to specific purposes (reducing class sizes, programs for English language learners, special education, and more). States have taken varying approaches to categorical grants, some relying on them heavily and others rarely or not at all. This issue brief provides a national landscape on the use of categorical funds by states, the number of categorical programs in each state, how the use of categorical funding has changed since 2008 when states were last surveyed on their use, and views on their effectiveness from state finance personnel. In addition, this issue brief includes case studies of four states and their use of categorical funding. The authors use a combination of prior research on state education finance, existing data from state and national organizations, and newly collected primary data--a state-level survey and district-level interviews--to inform their findings.