The purpose of the Title I program of the Elementary and Secondary Education Act is to provide for the special educational needs of educationally disadvantaged children. This paper discusses one of the key fiscal issues in the reform of Title I -- the design of the distribution formula. The paper focuses on the specification of the grant. The existing program is outlined, ways in which the definition of "disadvantaged" is of critical importance to the functioning of the program are discussed, and adoption of the Social Security Administration's poverty line is proposed. The existing and proposed improvements in calculating the level of compensatory expenditure per eligible child allocatable to each State are discussed. It is suggested that State payments be adjusted to reflect teacher costs. The grant specification section considers the advantages of a matching program as well as the incentive structure of the present program. Finally, an alternative proposal is evaluated. (Author/MLF)