Formula funding in Illinois reflects decisions on value choices which can be grouped in the categories of enrollment linkage, mission and diversity recognition, equity and fair share, and quality and program improvement. The enrollment linkage of the Illinois formula ties credit hour grants and categorical programs directly to full-time equivalent (FTE) enrollment, though it is "buffered" by a 2-year lag. On the local level, however, severe fluctuation patterns in enrollment have had substantial impact. The Illinois approach to the area of mission recognition and diversity has been the use of a system of seven different rates for funding categories and through supplemental, reinforcing, categorical programs. Illinois has addressed fair share and equity by establishing the"residual principle" in which the fair share of state funding is defined as 100% of the difference in cost between the statewide average cost and a standard local contribution from both tuition and local taxes. Illinois uses both categories and the credit hour grants to address program improvement and quality. Recommendations for changes in the current formula might include the following: (1) determine an average for enrollment and unit costs over a floating 3-year period to add stability in funding to individual institutions; (2) retain the system of multiple funding rates; (3) in the area of fair share, retain the residual concept but move gradually to a system that reflects local institutions' differing responsibilities and types of programs; and (4) provide for quality improvement through existing categorical grants. (LAL)