Information is provided on the budgeting formula developed for funding Alaska's community colleges. After the history of formula budgeting is discussed, its purposes are highlighted (i.e., to provide equity of funding among the community colleges; to reduce uncertainty in and to simplify the budgeting process; and to provide for more local decision-making and to facilitate planning). Next, the performance criteria for the formula, assumptions resulting from a unit cost study, and the means of funding of designated non-credit courses are presented. Then, the proposed formula (comprised of faculty, support, and travel allocations) is set forth, and a step-by-step procedure for using the formula is outlined. The following sections discuss the development of the formula and allocations for fiscal year (FY) 1981 through FY 1983. The final sections discuss the differences between actual and projected enrollments, suggest a transition period of 3 years before the funding to a college is reduced on the basis of formula allocations, and evaluate the success of the formula in meeting its objectives and performance criteria. Appendices include data on faculty/student ratios, support per Fiscal Year Equated (FYE) student, and percentage of travel costs in relation to faculty and support costs for FY 1981 through FY 1983; an analysis of minimum staffing needs for new community colleges; and sample state legislation. (HB)