This article addresses the design and application of cost adjustments in state school finance policies intended to compensate local public school districts for differences in the costs of recruiting and retaining teachers. Broadly speaking, the state policy objective for including cost adjustments to state aid for such things as teacher cost variation is (or should be) to promote equity, which may be viewed from either a student perspective or a teacher perspective. The article also raises the question of whether, in some cases, policymakers would be better off avoiding altogether the political minefield of adjustments for teacher wages. It shows how the political balance of power in states can easily lead to cost adjustments that financially reward those schools and districts that already hold a significant labor-market advantage, reinforcing rather than resolving significant inequities in the distribution of teaching quality. The goal of this article is to review conceptions and applications of cost-adjustment strategies for accommodating uncontrollable wage variation in state school finance policy. That is, how can states, through their aid-allocation formulas, support local public school districts in the recruitment and retention of a sufficient quantity of teachers of adequate quality? The next goal is to evaluate recent school finance reforms in three states--Missouri, Kansas, and Wyoming--evaluating in detail adopted policies to accommodate teacher wage variation. (Contains 10 figures, 6 tables and 19 footnotes.)