Public schools in New Jersey are financed primarily by local property taxes. This system of finance is unconstitutional, according to the New Jersey Supreme Court, and therefore it must be revised. The proposals for revision range from very slight increases in state school aid to complete state financing of schools, but all of the proposals shift at least part of the burden of school finance from local property taxes to state taxes. Thus, all of the proposals for revision provide some relief from property taxes. This paper examines the economic effects of this property tax relief, especially the effects on our hard-pressed central cities. The current system of school finance in New Jersey is unfair primarily because some school districts receive an excessive share of non-residential property taxes. It is also unfair because it encourages exclusionary zoning and because Federal tax laws treat homeowners and renters differently. It is inefficient because the property tax, despite its appeal as a revenue source, has undesirable long-run effects on the growth of central cities. An increase in state aid to schools would reduce these inequities and inefficiencies in proportion to the size of the increase. In particular, more state aid would lower property taxes, raise property values, lower rents, and help revitalize our dying cities. (Author/JM)