The study described in this report was conducted to examine the funding of Maryland's community college system and to develop an improved funding approach that would take into account differences in local wealth. After a discussion of the purpose and scope of the study, an explanation is provided of the existing funding structure, which is based on a proportional division of costs between the state, the localities, and the student, supplemented by a flat rate grant to each college and a set amount for each part-time student. After examining recent changes which have led to a lowering of the level of state support for community colleges, the report discusses the benefits these institutions provide to the student, the community, and the state. Then, three critical community college issues are addressed (i.e., the need for additional funds, local wealth, and the state funding mechanism), and recommendations are provided for each area. Finally, recommendations are summarized, including: (1) an increase of $270,000 in the annual college grant in fiscal year 1986; (2) an increase in state aid of $10 per part-time student; (3) an increase in state aid of $120 per full-time equivalent student in 1986; (4) the provision of of $150 in state aid per low-income student; and (5) increases in state aid after 1986 in proportion to increases in state funding for four-year colleges. Appendices include financial data, information on funding mechanisms used in other states, and proposed legislation. (HB)