Illinois confronts a financial crisis that threatens its capacity to implement the state's long-fought-for plan for improving our education system. Two-thirds of our school districts are now deficit-spending. Districts have dismissed at least 6,400 educators and aides, closed schools, lengthened bus routes, and reduced programs in everything from art to foreign language. For the first time, the majority of Illinois schools serve 40 percent or more low-income students. The financial strain is greatest for disadvantaged districts with little local wealth and large concentrations of low-income students. This report brings new light to the crucial topic of school funding. It explains the shortfalls of our current funding system and lays bare the inequities in how we have handled recent funding shortfalls. It goes on to provide insight into how we might alter the funding formula so that limited state education dollars are directed where they are most needed.