The purpose of this study was to examine the stimulative and distributive effects on local school districts in Michigan of the recent change from a categorical to a block grant approach in the federal education funding mechanism. The impact of the block grant program in the State of Michigan was studied by comparing federal fund allocation patterns at the local level in the three fiscal years after the block grant became effective (FY 1982-85) with comparable data from the six prior years under the categorical program(FY 1976-82). A quasi-experimental time series design was used to examine the impact pattern of the education block grant. The population of the study consisted of all 525 K-12 school districts in Michigan. Annual fiscal data for all Michigan school districts and other data available from the State Department of Education, the U.S. Department of Education, and local school districts were used in the analyses. Descriptive, relational, and inferential statistics were employed. The results of the analyses supported previous research findings that the categorical grant is more effective than the block grant in stimulating local spending on education. However, since this block grant included a distributional formula developed at the state level and because of distributional shifts caused by the formula, it was more likely to blur pure stimulative effects. The results also supported previous findings that the categorical grant is more effective than the block grant for particular policy objectives. These results, with some limitations, generally support the theory of selective vs. general grants given certain policy objectives. Findings in this study are applicable to Michigan and those states with similar distributional procedures and historical backgrounds.