The New Jersey legislature passed the Public School Education Act of 1975 in response to a 1973 state supreme court decision that New Jersey's school finance system was unconstitutional. That decision was based on the court's conclusion that the New Jersey Constitution commands the state to provide an equal educational opportunity to all children and that the existence of gross disparities in interdistrict expenditures per pupil was a relevant indicator of failure to meet the constitutional mandate. The purpose of this report is to examine whether the expenditure cap provision has achieved the fundamental goal of the new act--minimizing disparities in per pupil expenditures--or the legislative goals--controlling expenditures and reducing taxes. Analyses of the effect of the act during its first two years indicate that whereas the legislative goals have been achieved, there has been virtually no progress, and there may have been regression, in eliminating disparities in per pupil expenditures. The New Jersey experience has been essentially the same as that of all other states using this mechanism; school cost growth and teacher salary increases are slowed down but expenditure variation between rich and poor school districts is not reduced. (Author/IRT)