The majority of state funding for North Carolina’s 58 community colleges is distributed via a funding formula based on enrollment. North Carolina’s formula is more sophisticated than those used in some other states because it uses a tier system to account for differences in programs and levels of study. The Program Evaluation Division found that the funding formula is functional and generally acceptable to institutions and the State Board, though college presidents expressed concerns about the amount of funding in general. If the General Assembly wishes to change the current funding formula to improve efficiency and effectiveness, it could consider initiatives to increase the equitable distribution of institutional and academic support funds; improve funding stability through the use of a stop-loss provision and by funding the Enrollment Growth Reserve; align tier funding with course costs; refine the existing performance-based funding system; and add needs-based funding to the enrollment portion of the formula.