To improve the equity of Vermont's school finance system, the state legislature passed Act 60. This new funding mechanism is described, with a focus on the equity issues raised by the state supreme court. A court's decision struck down substantial dependence on local property taxes to provide revenue for local school districts. The report reviews the background of the case and describes how the court explained its position. The focus, however, is on the changes that the decision wrought in the finance system and the potential implications of these changes for school finance equity in the future, particularly the income-sensitive property tax provision that makes Vermont's system unique. The analysis centers on the basic structure of the reform--the block grant--which is funded through a statewide property tax. Ways to distribute these funds, such as through weighted pupil counts, were also reformed, and a process called an "equalized second tier" was implemented, which is a local option tax that is determined on the basis of the individual budget decisions made by local school boards. The transition to the new tax system and the categorical programs that are in place are described. (RJM)