This paper theorizes on the pattern in which investment in human capital affects the well-being of the rural community and is affected by public policy on education finding. Outmigration from rural regions is more likely for individuals with the highest educational achievement. Therefore, remote school districts tend to underinvest in education. In the case that all taxable property and therefore the tax burden is concentrated in the hands of a relatively few of the households, the actual level of investment in human capital would depend upon political institutions. Given the above factors, the only way out of chronic poverty for a remote rural district appears to be through intergovernmental transfers. There are three philosophical bases for programs of intergovernmental transfers to support public education: (1) minimum provision; (2) equal access; or (3) equal total provision. Examination of South Carolina's "minimum foundation" education shows that urban and rural differences in educational resources are narrowed, but differences in per-pupil expenditures on a district by district basis remain wide. Use of human capital formation as a strategy for rural development is feasible if: (1) there is an effective program for transferring resources for education from the affluent to the poor parts of the state; and (2) there is local leadership that is informed regarding the benefits of investments in education. This document contains a table comparing per pupil expenditures by urban and rural districts in South Carolina. (KS)