Improving the targeting of aid programs is a high priority among Federal and State policymakers. Commonly used indicators of fiscal and community well-being, such as unemployment, tax effort, and population size, disproportionately favor urban over rural areas. More care in the selection of targeting indicators would improve program efficiency and equity. Greater attention to program details, such as matching requirements, technical assistance, and the statistical properties of the targeting indicators, would also help tailor programs to rural conditions. Use of fiscal capacity indicators, such as per capita income, would keep program costs down by targeting aid to rural areas that cannot afford to help themselves.