Beginning in 2006, the "two exemptions and one subsidy" (TEOS) policy was integrated into the New Mechanism for Assured Funding for Rural Compulsory Education (hereafter the "New Mechanism"). The New Mechanism includes TEOS, raising the standard of public expenditure guarantees for rural compulsory education stage schools, creating a permanent mechanism for input into the maintenance and reconstruction of rural secondary and elementary school buildings, and perfecting the assured funding mechanism for prompt and complete issuance of salaries to rural secondary and elementary school teachers. The New Mechanism was extended to China's central and eastern regions in 2007. By October 2006, central governments had guaranteed RMB13.3 billion in reform funds for the New Mechanism, and various localities had guaranteed RMB7.7 billion. Because the New Mechanism began in most districts only in the spring of 2007, there are as yet few studies, especially evidence-based studies, on the results of its implementation. However, pilot experiments started in 2005 and overall implementation began in 2006, and some first-hand investigation and research materials have begun to accumulate. This paper uses previously available research findings as well as survey data to examine the problems the New Mechanism has encountered during its implementation. Proceeding from these problems, this paper also examines the challenges facing the construction of an "adequate" and "comprehensive" assured funding mechanism for compulsory education in China's rural areas. (Contains 3 notes.)