This report summarizes a 2001 decision by the New York State Supreme Court in a landmark school funding case, Campaign for Fiscal Equity (CFE), Inc. v. State of New York. The original lawsuit was filed on behalf of New York City students, charging that New York State has underfunded the New York City public schools and denied City students their constitutional right to a sound basic education. The Supreme Court decision declared the current state school funding system unconstitutional and ordered the legislature to replace it with a new cost-based system that ensures that every school district has sufficient resources to provide the opportunity for a sound basic education to all students. The Justice's decision defined a sound basic education in terms of the foundational skills students need to become productive citizens capable of civic engagement and sustained competitive employment. It named seven essential resources that the state must guarantee New York City students, including sufficient numbers of qualified school personnel, appropriate class sizes, additional resources for at-risk students, adequate and accessible facilities, and sufficient and up-to-date books, libraries, educational technology and laboratories, which the state must fund at minimum. The remedy restores the necessary link between need and resources devoted to meeting that need. Finally, the Justice directed the state to examine the effects of racial isolation on many of the City's school children and its impact on academic achievement. (SM)