The New Jersey State government could reduce pupil transportation aid payments to local school districts by between $35 million and $50 million by eliminating support for questionable expenditures and by using the funding formula adopted in the Quality Education Act of 1990. This report describes how these dollar savings can be achieved. The major conclusion is that the general approach of the new funding formula affords a matchless framework for controlling costs, if properly employed. At present, however, needlessly high payments are being made to a number of districts. Problems with the new formula include inaccuracy in reporting, overpayment, rewards for past inefficiencies, transportation for special education students, the use of population density as a factor for determining transportation costs, and "aid-in-lieu of" transportation of private school pupils. Five recommendations are made to change the aid formula, data-collection process, and practices. Six tables are included. (LMI)