This report presents findings and recommendations from a study conducted by the Maryland General Assembly examining options for increasing state formula aid and changing the distribution of aid to the state's 18 community colleges. Following a letter of transmittal providing background information on community college financing, the report summarizes key findings, including that current state funding for the colleges continues to be inadequate and that the state formula aid and distribution of that aid for community colleges leads to major funding inequities. Next, recommendations for addressing the situation are presented, including the provision of an additional $15.5 million in community college funding for fiscal year (FY) 1997 and the implementation of changes in state formula aid and distribution mechanisms. The bulk of the document consists of eight appended reports describing the role of community colleges in Maryland, the evolution of the community college funding formula, a national comparison of community college funding, options for increasing state mandated aid for community colleges, options for changing the distribution of community college formula aid for FY 1997-2000, the current community college formula using full time equivalency (FTE) counts, proposed maintenance of effort requirements, and a proposal from the Maryland Association of Community Colleges for strengthening community colleges' role in economic development. (TGI)