The systems of finance and governance of California's state universities and colleges and its community colleges have differed significantly. While the four-year institutions have been funded from the state budget, prior to 1978, the community colleges depended largely on local property taxes for revenue supplemented by state apportionments to redress imbalances between poor and wealthy districts. Proposition 13 drastically altered community college financing by reducing property tax revenues, mandating county- rather than districtwide collection of property taxes, and eliminating the district's authority to set or alter tax rates. Senate Bill 154 (SB 154) implemented a "target budget" approach in 1978-79 to mitigate the community colleges' immediate financial crisis. Later, Assembly Bill 8 (AB 8) sought to alleviate the rigidities of SB 154, return to enrollment-based funding, and maintain local control over budgets and expenditures. While AB 8 has generally been an effective measure, certain concerns, which have been recognized by the Assembly Education Committee, remain. These involve: (1) statutory versus budget-act approaches to community college finance; (2) free flow of students between districts; (3) the financial implications of program changes; (4) the effectiveness of incremental cost funding; and (5) the community colleges' overall mission in times of limited state resources. (The paper presents the position of the California Postsecondary Education Commission on these issues.) (HB)