Federal funds are allocated to states through four statutory formulas that are based primarily on census poverty estimates adjusted for the cost of education in each State. Basic Grants provide funds to LEAs in which the number of children counted in the formula is at least 10 and exceeds 2 percent of an LEA's school-age population. Concentration Grants flow to LEAs where the number of poor children exceeds 6,500 or 15 percent of the total school-age population. Targeted Grants are based on the same data used for Basic and Concentration Grants except that the data are weighted so that LEAs with higher numbers or percentages of poor children receive more funds. Targeted Grants flow to LEAs where the number of poor children is at least 10 and at least 5 percent of the LEA's school-age population.

Education Finance Incentive Grants (EFIG) distribute funds to States based on factors that measure (1) a State's effort to provide financial support for education compared to its relative wealth as measured by its per-capita income and (2) the degree to which education expenditures among LEAs within the State are equalized. Once a State's EFIG allocation is determined, funds are allocated to LEAs in which the number of poor children is at least 10 and exceeds 5 percent of the LEA's school-age population.