This report provides background information on California's academic standards, resources and funding mechanisms. Its findings point to relatively low levels of school spending, a gap between academic standards and school resources, a finance system based on previous funding levels rather than actual school resources and their costs, and questions the most efficient use of the state's school funds. In addition, the report provides a discussion of Proposition 98 and its origins. The report concludes that the work of the Quality Education Commission, which is charged with developing school prototypes and estimating their costs, may provides a useful bridge between the State Board of Education, which sets academic and content standards, and the legislature, which allocates school funds. The report is divided into eight sections: (1) Introduction; (2) Standards and Assessment; (3) School Resources; (4) The Institutions of School Finance; (5) Proposition 98; (6) Class Size Reduction and the Distribution of Expenditures; (7) Poverty and Revenue; and (8) California's Quality Education Commission. A foreword by David W. Lyon is also included. The following are appended: (1) Data Sources; (2) Appendix to Chapter 3; (3) Appendix to Chapter 4; (4) Appendix to Chapter 5. (Contains 24 figures, 34 tables, and 11 footnotes.) [For an associated research brief, see ED497446.]