Explained and illustrated is the formula funding system used for colleges and universities in Texas. This system is considerably more complicated than the formulas used in other states. Data for institutions in the state system for fiscal 1978 are presented; actual appropriations are used rather than requests, and formula-produced amounts are compared with expenditures. Recent changes in the formula system are discussed, such as decreased dependence on information from other states and regions. Specific areas of formula use examined are: general administration and student services and general institutional expense; faculty salaries; departmental operating expense; instructional administration; library; organized research; physical plant general services; building maintenance; custodial services; grounds maintenance; campus security; community service and continuing education; and special requests. (MSE)