The first of a series on school finance and the role of the state/local community, this document examines recent trends and developments in property taxation. The setting for property taxation and the state and local share of tax revenues for financing education are discussed. Two charts illustrate: (1) school district property tax collections from 1966-67 to 1981-1982; and (2) the state and local revenue receipts for public schools between 1972-73 to 1983-84. Court decisions, tax limitations, and inflation are analyzed, and property taxation problems and property tax reform measures are examined. Attention is given to the challenges that school districts face as they look to state sources for funding in the wake of diminished support from property tax sources. Central to this report is the belief that the property tax offers fiscal stability to school support; local evidence, however, supports the finding that the state and local share of school finance must come from balanced and effective use of income, sales, and property taxes to avoid excessive reliance on the latter. This view coincides with the National Education Association's (NEA) position that the property tax burden should be more equitably shared among low-, middle-, and upper-income taxpayers. (JAM)