We don't do it by grants, but we do give all 13 classrooms (and special ed, choir, PE, and Title I Reading) $200 each year, to spend. They can spend it on books, training, field trips or whatever they need, but not for personal items. We have a manilla envelope with a ledger for each room pasted on the front, so they can keep track of what their balances are. They put the receipts for reimbursement in the envelope, and route it to our treasurer, who cuts them a check. We try to get them to batch their requests as much as possible. The money carries over year to year, so if they want to save it for a big ticket item, they can. In addition to providing this bookeeping service on our allotment, we are also tax-exempt, so we can "shelter" any fund-raising monies the classes want to put in their accounts as well. Its sort of a big pain, but it has worked really well, and our teachers are grateful for the help.
The grant idea sounds good, but I would worry about it taking up too much valuable staff time, as well as your time to review them. I know in our district there's no way teachers would be able to make the time to apply for them - they'd be better off applying for bigger money grants, where the returns for their time investment would be greater. It might also work against your group, as teachers might feel their grants weren't judged objectively. Its hard to be objective on which project is more important to fund. I am saying this because my group has often requested grants and I know how we feel when we are turned down. One time our proposal for training to work with at-risk kids was turned down in favor of a kite-making workshop. Boy, were we insulted! Then we realized that what cinched the decision was the track record of the kite people; it was our first application and the commission questioned our follow-through....hardly an objective decision!