Scotland's 43 further education colleges will receive Pounds 229 million in the coming year, an increase of 4 per cent.
Forty per cent of individual college grants are based on student numbers in differently weighted subject areas, while 60 per cent is based on 1994/95 funding levels.
Lord James Douglas-Hamilton, Scottish Office minister for education, said: "That balances the need to move to a fairer approach to funding, derived from the level of student activity, and stability to assist colleges' strategic forward planning."
Only 10 per cent of 1994/95 budgets were formula funded, with 90 per cent based on historic funding levels. Nine colleges are facing budget cuts, the worst hit being Jewel and Esk Valley College with a drop of Pounds 352,700.
John Sellars, chief executive of the Employers' Association for Scottish further education colleges, said it was difficult to see how they could afford pay increases and maintain staff numbers.
"While the overall allocation has increased for 1994/95, Government plans at present are to reduce the overall allocation by Pounds 8 million over the next two years," he said.