This paper discusses an approach to solving the school financing problem that treats separately the twin concerns of taxational and educational equity. Part 1 reviews the decision of the California supreme court in Serrano 1 as it relates to these concerns and the manner in which the state district court on remand attempted to utilize the concept of fiscal neutrality to resolve these problems. Part 1 then concludes with a review of the equal protection analysis utilized in Serrano 2 and the potential impact of the analysis on school resource development. Part 2 provides a review and critique of the school finance schemes suggested in Serrano 2 as constitutionally acceptable alternatives to the existing system of school finance. Part 3 briefly discusses a suggested legislative response to Serrano 2--the key feature of which is the separation of revenue production from distribution. (Author)