This report examines school funding concerns in Pennsylvania and how they affect Philadelphia schools and, to some extent, the schools of Pittsburgh. The report presents a new way to look at issues of school funding equity and adequacy by trying to link the debates over high standards and the opportunity to meet them by defining adequacy around the resources of the highest achieving, rather than highest spending, school districts. The report takes a close look at how Pennsylvania funds the Philadelphia schools and what might be considered adequate, but it does not consider issues of breaking up or taking over the schools. Findings show that Philadelphia schools are much more like schools in other large cities across the United States than they are like any other school systems in Pennsylvania except Pittsburgh and Chester-Upland. The report demonstrates the strong relationship between student achievement and poverty, race, and funding. Findings clarify the nature and locus of imbalances in resources available for educating children in Philadelphia compared with children in the suburbs and elsewhere in the state. Data show how the Philadelphia public schools spend their scarce resources, and they also show that the predictably low levels of achievement nevertheless represent substantial improvements since 1995-1996 due to many reforms instituted by the city. (Contains 9 tables, 4 figures, 21 endnotes, and 31 references.) (SLD)