Abstract Providing public transit operating assistance is a recently acquired function in many states in the United States. Little standardization in disbursement criteria exists, and the criteria used often have serious drawbacks. These drawbacks, both conceptual and practical, are examined and an alternative allocation procedure is suggested which considers large urban, small urban, and rural or regional transit systems separately. Within each of these categories, efficiency and need are balanced in allocating available funds to individual properties. The suggested procedure is applied to data from the State of Iowa, and the potential for its implementation is other states is assessed.