Significant differences in the cost of living exist among different parts of the country and among different rural and urban counties within the same state. This paper develops a method for estimating current geographical differences in the cost of living index for all states for 1981-90. These estimates, based on Bureau of Labor Statistics data, are shown to correspond closely to 1989 statewide cost of living estimates derived from American Chamber of Commerce Research Association (ACCRA) data for selected cities. The paper also develops estimates of living costs among large cities, metropolitan areas, and nonmetropolitan areas within each state for 1989, and for all counties within Illinois for 1989. The implication of using regional cost differences such as those presented in this document, based in the cost of living in state school aid formulas requires further comment. The cost of living index could be made specific to each school district using a regression equation presented in the document based on the 1989 ACCRA data. Living costs are highest in Hawaii, Alaska, Connecticut, Washington, D.C., New Jersey, Massachusetts, New York, and California. They are lowest in Mississippi, West Virginia, Arkansas, Idaho, Utah, Oklahoma, and Nebraska. There is a 57 percent difference in the purchasing power between the highest and lowest states. The variation between real purchasing power within states between the higher cost cities and lower cost metropolitan and nonmetropolitan areas is 22 to 35 percent, respectively. The basic pattern of differences persists since 1977 with shifts related to economic growth rates. Included are numerous data tables and two explanatory appendices. (25 references) (Author/MLH)