Students with disabilities or suspected disabilities are evaluated by schools to determine whether they are eligible for special education services and, if eligible, to determine what services will be provided. In many states, the results of this evaluation also affect how much funding assistance the school will receive to meet the students' special needs. Special education classification is not uniform across states or regions. Students with identical characteristics can be diagnosed as disabled in one state but not in another and may be reclassified when they move across state or school district lines. Most disabilities with a clear medical basis are recognized by the child's physician or parents soon after birth or during the preschool years. In contrast, the majority of students with disabilities are initially referred for evaluation by their classroom teacher (or parents) because of severe and chronic achievement or behavioral problems. There is evidence that the prevalence of some disabilities varies by age, the high-incidence disabilities such as learning disabilities and speech-language disabilities occur primarily at the mild level, the mild disabilities exist on broad continua in which there are no clear demarcations between those who have and those who do not have the disability, and even "mild" disabilities may constitute formidable barriers to academic progress and significantly limit career opportunities. Problems with the current classification system include stigma to the child, low reliability, poor correlation between categorization and treatment, obsolete assumptions still in use in treatment, and disproportionate representation of minority students. Both African-American and Hispanic students are disproportionately represented in special education but in opposite directions. The disproportionately high number of African Americans in special education reflects the fact that more African-American students than white students are diagnosed with mild mental retardation. Though poverty, cultural bias, and inherent differences have been suggested as reasons for this disproportionate representation, there are no compelling data that fully explain the phenomenon. In most states, classification of a student as disabled leads to increased funding from the state to the school district. This article suggests a revised funding system that weights four factors (number of deficits, degree of discrepancy, complexity of intervention, and intensity of intervention) in a regression equation that would yield a total amount of dollars available to support the special education of a particular student.