In 1996, the formula used to fund community colleges in Iowa was repealed pursuant to the state Division of Community Colleges and Workforce Preparation's recommendations. This report presents information on the colleges and recommendations developed by the Division for establishing a new funding formula. Following an introduction, part 2 provides background information on Iowa's community colleges, describing their mission and students and providing data on the return on investment that the colleges have provided. Part 3 reviews trends in community college enrollment, programs, and salaries that affect funding and describes trends in funding postsecondary education in Iowa from 1967 to 1996. Part 4 describes research undertaken by the Division to identify possible strategies for meeting the colleges' funding needs, including a literature review to determine funding practices and trends nationwide, an analysis of funding structures in similar states to determine levels and sources of revenue, interviews with Iowa community college presidents to determine local funding issues and suggestions, and a Delphi process involving the college presidents and chairs of local boards of trustees. Part 5 reviews 12 principles guiding the development of a new formula, while the final part presents the Division's recommended funding structure. Contains 28 references. A December 1995 report to the Iowa General Assembly on community college funding recommendations and tables from a fiscal year 1996 facility survey are appended. (HAA)