Prepared in response to the legislative mandate contained in California's Education Code, this report on program-based funding in the California community colleges recommends criteria and standards for the purposes of making budget requests to the governor and legislature for the colleges and allocating state general apportionment revenues. Part I discusses the elements of program-based funding and the relationship among them. Individual sections focus on the major categories for operating community colleges (instruction, instructional services and libraries, student services, maintenance and operations, and institutional support); standards for level of service and the corresponding funding deemed appropriate for each category; target allocation; standard allocation, using a workload measure in each category; minimum funding level; and equalization. Part II presents relevant legislation; a program-based funding standard allocation formula; workload measures; 1988-89 funding standards; a comparison of current formula revenue and standard allocations; and a program-based method of allocating program improvement funds. Part III contains a background report on the development of the program-based funding model for California community colleges. The four chapters in this report explain: (1) the deficiencies of the existing system, the search for a new approach, and the work of the Task Force and Ad Hoc Committee on Community College Financing Reform; (2) the advantages and disadvantages of program-based funding; (3) the program-based funding model, including sections on economy of scale factors and issues of implementation; and (4) simulations of program-based funding. (JMC)