The state of Michigan instituted the Gast-Mathieu Fairness in Funding Formula in order to equitably apportion state monies to state community colleges. This report examines the Gast-Mathieu Fairness in Funding Formula, and explains and illustrates how the formula works, while documenting how and when it has been used in making state appropriations to the community colleges. The Formula was first used to distribute funds in FY 1984-85. The Formula calculates a dollar amount need for each college based on instructional and non-instructional costs, tax equalization grants, local and student funding responsibility, and other sources of revenue. The Formula applies statewide average cost factors to activity measures specific to each college, thereby estimating the total expenditures each college should expect to incur. This is called "Gross Need," and is a summation of instructional and non-instructional costs. Tax equalization grants are added to Gross Need as a separate component. Instructional Need accounts for 48.6% of the entire Target Need for colleges. State appropriations for FY 1997-98 were expected to total over $275 million, or 40% of total community college funding. Presents figures for three fictitious community colleges applying the Formula. (Contains 12 figures and 4 tables.) (NB)