funded. This paper has identified four underlying reasons for the underfunding:

First, the institutions have higher overhead costs than those that either operate outside of the city or serve better-prepared students. These extra costs are not commonly recognized or factored into budgeting decisions at the state and federal levels.

Second, the institutions follow practices that deprive them of needed revenue—for example, classifying the basic skills and other compensatory courses as "non-credit," and failing to keep records and develop budgets in a form that would permit policy analysts and budget officials to make valid cost comparisons.

Third, the full-time equivalency (FTE) funding formulas in use by the states, the federal government, and the institutions are inconsistent, making the present enrollment-driven funding approach inequitable. Relatedly, neither FTE nor headcount funding arrangements take into account that the costs of compensatory programs bear no relation to the number of credit hours a student takes.

Fourth, problems of eligibility and administration prevent the urban poor from making full use of available financial aid and loan programs. This under-use affects the financial fortunes of the institutions and lowers the college participation rate of large groups they should and might otherwise be serving.

Although strong action is required in each of these areas, we have two priority recommendations aimed at promoting more equitable and adequate financing of the institutions and their needy students.

• The institutions, along with state and federal funding sources, should work toward developing greater consistency in data collection, record keeping, operating assumptions, and funding and financial aid criteria.

• Educational research organizations should undertake additional studies of the student aid system—to monitor its effects, examine problems of implementation and use, and recommend needed changes in federal and state policy and practice.