Administrative and empirical factors affecting the relationship between changing workloads and concomitant budget adjustments are examined in this analysis of the funding structure by which state aid to each California community college is adjusted for increases or decreases in average daily attendance (ADA). The report first describes current state funding policies which call for the utilization of marginal, rather than average, cost adjustments in response to ADA changes. This is followed by an examination of nine administrative questions to be considered before any changes in current policy governing incremental costs can be considered. These questions address the appropriateness of the marginal cost rate applied in current policy, the fiscal distinctions between large and small college districts, and the effectiveness of using several workload measures, rather than only ADA, in identifying and predicting costs. The report then discusses the theories of marginal costs and economies of scale which underlie present state policy and summarizes the results of a linear regression analysis undertaken to determine the annual marginal rates over a six-year period for six cost categories and their representative workload indicators. Regression tables are appended. (JP)