The "funding gap" in public higher education in California represents the difference between state appropriations and the amount needed to fully support each segment's educational mission. This report identifies and defines the funding gap for the California Community Colleges (CCC); measures the consequences of this gap on program quality and access; reports on how the colleges are to maintain their mission in light of current funding; and recommends future state policies for financing the CCC. Major report highlights include the following: (1) the current funding gap for the CCC is estimated to be at $2.3 billion, 82% more than is available; (2) as a consequence of the funding gap, the student to faculty ratio stands at 27:1 (compared to 18:1 at comparable colleges in other states); (3) the CCC's offer only about half of the basic skills instruction needed; (4) library holdings and services are substantially below national standards; (5) the CCC turned away an estimated 120,000 students in fall 1991; and (6) the CCC is unable to maintain its mission in light of the current gap, although certain legislative mechanisms and pending initiatives, as well as increased staff productivity and new instructional resources (e.g., interactive television and computer-aided instruction) may alleviate a small part of the gap. Policy recommendations outlined in the report include allowing local colleges to determine priorities for class enrollment; pursuing federal vocational education funds more actively; enhancing school business partnerships; increasing fees selectively; and providing incentives for colleges that adopt cost-effective delivery techniques. Appendixes review relevant legislation, and provide detailed data tables. (PAA)