Prepared in response to a directive from the California Legislature, this report presents the results of a differential funding study for the California community college system. Part one provides a summary of the study and its findings, discusses elements of a proposed plan for the implementation of a differential funding system, and indicates what legislation would be required to implement the system. In Part two, chapter 1 provides a background to the funding study, including a history of community college funding in California, a discussion of the impact of changing funding policy and of reduced funding levels, and an overview of the expectations for differential funding. Chapter 2 presents the study plan and procedures, including information on advisory groups and staffing, guiding criteria, background, and research questions. Chapter 3 focuses on differential cost funding, highlighting state and local district interests, and advantages and disadvantages. After chapter 4 presents available data and a plan for obtaining additional needed data, chapter 5 offers a differential cost funding approach that indicates support categories, workload measures, support levels, analysis of impact on individual districts, adjustments for inflation, and incremental cost adjustments. Chapter 6 outlines a suggested plan for implementation, including elements of the plan, a suggested schedule, estimated costs, and legislative authorization needed. Appendices provide background data and reports. (HB)