In December 1996 the New York State Legislature enacted sweeping changes in the structure and governance of the New York City public school system. The legislature and the Governor have shifted over one million school children, their parents, and their teachers back to a centralized, hierarchical system, in which one person, the chancellor, embodies accountability. The law makes clear the power of the chancellor to intervene in any school or district that consistently fails to achieve educational results and standards approved by the city board or the State Board of Regents. Community school boards have been deprived of any real power. They have the right to employ a superintendent selected by the chancellor. Representative democracy has been effectively removed as a form of school governance. As New Yorkers and others consider these reform strategies and the "ownership" of the city's schools, they need information about current performance and spending. This report outlines core problems in New York City's schools. While the city schools' performance is by no means the worst in the country, it has been resistant to improvement over the years. The high school graduation rate and the achievement of the city's graduates are lower than they should be. In many neighborhoods, performance is poor, and failing schools tend to cluster in identifiable neighborhoods, denying equal opportunities to many of the city's children. District profiles in this report describe the high incidence of failing schools in eight New York communities. Three appendixes list the lowest performing elementary and middle schools in the city and present selected district profiles. (Contains 11 tables.) (SLD)