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Title I of the Housing and Community Development Act of 1974 consolidated several categorical programs for community development into a single program of community development block grants. In order to provide for early Congressional reconsideration of the method for distributing assistance, the Department of Housing and Urban Development was asked to prepare a report which would contain recommendations for modifying, expanding, and applying provisions relating to the funding method, fund allocation, and basic grant entitlement determination. This paper presents the methodology and results of such a formula study. The basic purpose of the study was to develop and test alternative formulas for distributing program funds according to community development needs. The report includes an explanation of how shares for recipients are determined under full formula funding and during the transition period (Fiscal Year 75 through Fiscal Year 80). Also reviewed are recent studies that have attempted to develop relative measures of public expenditure needs, and methods used by researchers to compare alternative distribution formulas with respect to evalution indices are outlined. A list of community development need indicators is presented, and the factor analysis from which the per capita need scores are derived is explained. The need scores and variables are then used to evaluate and compare existing formula distributions. Seven alternatives to the present formula are presented and evaluated by a variety of criteria. The appendices include a comparison of the report methods and results with those of other researchers and presentations of other relevant studies.