An overview of the status of rural school financing revealed three major reasons why rural schools are facing major problems in financing today: (1) school reforms have generally failed to address the specific needs of rural and small schools; (2) researchers have failed to recognize small school differences in their collection, classification and analysis of data; and (3) state governments have not faced the complexity of school finance problems in rural districts. Equalization efforts have generally reflected three approaches: high-level foundation, augmented foundation, and district power equalization. The approaches used by the four states in the U.S. Department of Education Region VII (Iowa, Kansas, Missouri, and Nebraska) revealed considerable difference from one state to another, and indicated inadequate efforts to recognize the special funding needs of their smaller rural school districts or to address the unique expenditure problems associated with small size and population sparsity. State and federal school finance laws were seen as needing to be more flexible, with each level of local, state and federal governments addressing financial concerns so that rural school children are guaranteed their fair share of dollars available to education. (JD)