A NEW BASIC CONCEPT IN FINANCING EDUCATIONAL SERVICES IS THE CHANGE FROM VIEWING SCHOOLS AS "STANDARDIZED-OPPORTUNITY-SYSTEMS" TO SEEING THEM AS "DIFFERENTIATED-OUTPUT-ACCOUNTABILITY-SYSTEMS." THE ACCOUNTABILITY SYSTEM OF FINANCE, REQUIRING A SUPPLY OF ANALYTICAL STUDIES TO GUIDE DECISIONMAKERS, WOULD HAVE THREE MAIN COMPONENTS--(1) STATE GOVERNMENTS SHOULD SET MINIMUM STANDARDS OF STUDENT ACHIEVEMENT IN BASIC SUBJECTS AND COMPUTE EACH DISTRICT'S COSTS FOR PROGRAMS THAT WOULD ALLOW STUDENTS TO MEET OR SURPASS THE STANDARDS, (2) STATE GOVERNMENTS SHOULD ESTABLISH AN "EDUCATIONAL IMPROVEMENT FUND" TO STIMULATE ADVANCES IN SCHOOL PERFORMANCE, AND (3) LOCAL INITIATIVE SHOULD BE ENCOURAGED TO FUNCTION ON TOP OF THESE TWO STATE PROGRAMS. LOCAL INITIATIVE COULD BE EXERCISED BY MEANS OF A SUPPLEMENT TO A STATE INCOME TAX, WHICH SHOULD BE MATCHED BY THE STATE GOVERNMENT UNDER A "PERCENTAGE-EQUALIZING" SUBVENTION. FINALLY, FOUR ADDITIONAL STEPS SHOULD BE TAKEN IN THE FORM OF THE FOLLOWING CONTRACTUAL ARRANGEMENTS--(1) STATE CONTRACTS WITH PRIVATE FIRMS TO UP-GRADE LOW-PERFORMANCE SCHOOLS, (2) LOCAL DISTRICT CONTRACTS WITH STATES TO SUPPORT A DEFINED SET OF IMPROVEMENT GOALS WITHIN ITS BORDERS, (3) UNIVERSITY ADDITION OF 35-40 PERCENT OVERHEAD IN GOVERNMENT CONTRACT ARRANGEMENTS, AND (4) STATE GOVERNMENT CONTRACTS ISSUED TO LOCAL DISTRICTS TO MEET THE FULL COSTS OF TEACHER DEVELOPMENT PROGRAMS. THIS PAPER WAS PRESENTED AT THE SYMPOSIUM ON OPERATIONS ANALYSIS OF EDUCATION (WASHINGTON, D.C., NOVEMBER 19-22, 1967). (HW)