Analysis within a program budgeting system assists in planning and management through two functions: it generates realistic descriptions of the resources and processes used by ongoing programs to produce educational outcomes; it permits objective comparison of alternative ways to conduct a given program. Two steps are crucial to the analysis: correct problem definition and formulation, and description of alternative problem solutions. Further, a good analysis gives concrete evidence that peripheral effects of the alternatives have been ascertained as well as possible, and provides estimates of the cost and effectiveness of those alternatives throughout the probable life of the program. To carry out such an analysis, people are needed who have a thorough knowledge of the educational system, and who use a rational, objective, intellectual approach with a large measure of common sense. 17 pp. Ref.