This paper critically examines some of the ways in which schools are currently financed and argues for State assumption of educational costs as a viable alternative. The document begins with a description of current school district revenue sources and discusses the official division of responsibility for school finance between the State and local governments. The author then criticizes the present system, founded when the cities were relatively richer than they are today, on the grounds that it has led to inequity, illogical resource allocation, and poor long-range planning. Financial data for the school districts of Long Island, New York, are presented in a case study to point out that the present system of finance discriminates against low wealth and large districts while favoring small and rich districts. The document then suggests how a program involving State assumption of educational costs would look and considers the various arguments against full State assumption. The document concludes by suggesting reasons for preferring State assumption of educational costs to district power equalizing. (Appended tables may reproduce poorly. ) (Author/DN)