State supreme courts have had major impacts on education policy and service delivery in recent years through their rulings on the constitutionality of existing school-finance systems. This paper reviews the legal context against which current debates about the merits of alternative plans for school-finance reform are being played out. It reviews the key federal and state court cases that have created pressure both to improve education quality and reform unfair school-finance structures. It also summarizes court rulings in the major school-finance cases that have been decided over the past 20 years and highlights a number of policy issues that state and local policymakers must address in the process of reforming funding systems overturned by state courts. State judicial renderings on the constitutionality of school-finance systems have typically been based on interpretations of the equal protection and education clauses of state constitutions. Patterns both among states and over time in state court rulings are difficult to discern because of the wide interstate variability in relevant constitutional provisions and case law, the nature of the evidence presented, and the political and educational contexts overlaying the litigation. However, more recent rulings appear to have focused on rectifying intrastate disparities in student achievement as opposed to merely equalizing differences in spending. The rulings challenge state policymakers to operationally define "adequate" resource levels and determine the appropriate balance between state and local governments in raising the necessary revenues. A table of state Supreme Court and key lower court school-finance decisions, 61 endnotes, and information on the Finance Policy and its resources are included. (Contains 21 references.) (LMI)