Just 1 day before a court-imposed deadline of June 1, 1993, Texas Governor Ann Richards signed into law Senate Bill 7 (S.B. 7), the newest version of the Texas school finance system. This paper describes the state's new school finance system with regard to the following: (1) its constitutionality; (2) the provision of a system that equalizes school districts' capital outlay expenditures; (3) full funding of the equalization portion of the school finance system; and (4) the legal challenge to the adequacy of the school finance system. It also presents a historical overview of Texas school finance reform since 1984. Informed sources believe that S.B. 7 will survive constitutional scrutiny. However, the adequacy claim under the "suitable provision" portion of the education article (Texas Constitution, article VII, paragraph 1) may become a salient issue. The legislature must implement a reasonable and equitable funding mechanism for capital outlay. Perhaps the most important issue will be the availability of state revenues to fully fund the bill's equity provision. (LMI)