This document offers a guideline for states to develop a small areas scheme for analysis of health data, using small area analysis framework. The author primarily draws from his experience of developing small area analysis at the Utah Department of health (see Haggard, Shah and Rolfs,1999). The term ‘small area’ is used to imply areas that are large enough to have a sufficient number of events of interest to yield stable rates, yet they are small enough to unmask variations in the rates and still convey a sense of community.