This report is the result of more than 2 years of extensive review of the education of Latino students in the New York City school system. The investigation found that Latino students, who numbered 355,000 during the 1992-93 school year, now account for 36 percent of the total student population. Over one quarter of these students have limited English proficiency, and these students are overrepresented in special-education classes. The current allocation formula that is used to distribute funds and is based on a district's average teacher salary gives a significantly greater share of tax dollars to affluent nonminority districts than it does to districts with far greater educational needs. Fifty-five percent of students in the 55 city schools cited as low-performance schools are Latinos. In addition, the study finds that Latino students are not being instructed adequately for college-preparatory courses. Recommendations are made for a comprehensive action agenda to address these failures. The recommendations center on better allocation of financial and educational resources and maximization of the use of available Latino-community resources. Information from various aspects of the study is presented in 32 tables. Contains a 60-item bibliography and the surveys used in a fact-finding survey of students. (SLD) (SLD)