The primary purpose of this study is to examine the relationship between the cost-of-living allowance used in the Alaska Public School Foundation Program (PSFP) to the actual cost of providing educational services in different regions of the state. The focus of this examination is on "instructional unit allotments," the factor in the PSFP that adjusts for different costs in different areas of the state. However, the study also raises questions about other features of the PSFP, most notably the definition of basic need and the relationship of a needed cost-of-education index to this definition. Chapter 1 presents a short history of instructional unit allotments in the foundation program; chapter 2 compares instructional unit allotments with available Alaskan interregional cost-of-living indices; chapter 3 compares instructional unit allotments and the cost of living with actual expenditures for education; and chapter 4 summarizes findings and conclusions from the study. (Author/JG)