The purpose of this report is to explain and examine the 1974-75 state education aid formula in light of two questions concerning equity: Are the pupils attending the public schools of New York City denied equal educational opportunities because of inequities in the state system of financing public education? If the state system is inequitable, what changes should be considered in reforming the system? Sections of the report examine the state aid philosophy, state aid formulas, the New York formula, and the fairness of the state formula in respect to New York City. The report concludes that the formula is discriminatory. It advocates full state funding. Several short-term reforms are suggested in the event that full state funding is not acceptable. (Author/IRT)