The development of Texas' new cost-of-education index (CEI) for 1992-93 is described in this report. The two components of the index are price, which adjusts for regional price variations beyond the control of local districts, and scale, which adjusts for diseconomies of scale due to differences in district size as measured by pupil attendance. Projected benefits of the plan include a minimal tax increase, negligible losses in state aid per pupil, and lower cost of implementation. Chapters provide information on the following: statutory references to the CEI; the recent history of price and scale adjustments; methodology; percentage of basic allotment to which the CEI is applied; impact of the CEI; and key issues in development. Four figures and four tables are included. Appendices contain statements by the advisory panel and foundation school fund budget committee, the CEI index rule, a summary of public testimony, index calculations, definitions of terms and data, and analysis of the index's impact. (LMI)