Two investigations were conducted to determine whether rural school districts receive a fair share of federal education funds: a quantitative analysis of the distribution of federal funds between rural and nonrural school districts and a qualitative exploration of the special needs and disadvantages of rural school systems. The quantitative study examined, for six states, the distribution of fiscal year 1977 funds for two state-administered federal programs: Libraries and Learning Resources (ESEA Title IV, Part B) and Educational Innovation and Support (ESEA Title IV, Part C). In the sample states Title IVB funding (formula based) provided rural districts with a fair proportion of program funds according to the standard of equal funding per student. For Title IVC funding (grants competitions) rural districts fared poorly when states awarded fewer, larger-sized grants. Fieldwork conducted at state, regional, and local education agencies, revealed three major problems affecting the quality of rural education: financial constraints, difficulties of attracting staff, and administrative limitations. The study findings suggest that the problems of certain rural areas (particularly the economically depressed and the more isolated and less populated) merit policy initiatives independent of urban or suburban policies. (Author/JH)