Anything that's underfunded doesn't have enough money. An underfunded college student can't afford textbooks — or pizza.
When a group or organization is funded, it's provided with the money, or funds it needs to function properly. Being underfunded means having an insufficient amount of cash on hand. An underfunded school doesn't have enough money to pay its staff and teachers, and it might have to eliminate art and music classes. If your lemonade stand is underfunded and you can't afford cups, it's unlikely to be a successful business!