As part of litigation challenging the equity and adequacy of school funding in Alabama, educational resources and school conditions were examined in the highest and lowest funded school districts in the state. Identification of these districts revealed that all eight of the highest funded districts were urban systems, while all eight of the lowest funded districts were rural or county systems. Site visits to 45 schools in 15 of the above districts, interviews with principals, and a teacher survey produced completely consistent findings of clear disparities between rural and urban schools. Compared to urban schools, rural schools had less attractive physical plants and grounds, fewer educational resources in virtually all areas, fewer instructional offerings, and staffs that were more dispirited about their abilities to provide effective education under existing conditions. Particular educational and environmental disadvantages of rural schools included restricted opportunities for participating in outdoor athletics; discomforts caused by inefficient heating and cooling systems, old and dark school interiors, and dirty rest rooms lacking in basic supplies; cramped classrooms lacking sufficient textbooks and maps; and old and inadequate libraries and gymnasiums. In addition, teachers and principals reported staff and student involvement in fund raising, and the lack of funds for enrichment programs, subjects such as drama and foreign languages, professional development, and teacher compensation for extra work. Includes tables of statistical data. (SV)