This paper describes the historical development of performance contracting, discusses the first performance contracting experiment, cites reactions to performance contracting, and supplies supportive data. The contents are designed to assist the New York State Board of Regents to determine policy for the State Education Department and the New York schools. The contents include discussions of the Texarkana Project and other contracts, the barriers to letting out performance contracts in New York State, the elements of financing contracts, and the pros and cons of this educational innovation. Supportive appendixes include statements from prominent educators and other people concerned with performance contracts, descriptions of the Texarkana and other projects, discussions of the legal aspects of performance contracting, model specifications for performance contracting and evaluation criteria, financial detail, and references and bibliography. Related documents are EA 003 347, EA 003 356, EA 003 358, EA 003 391, and EA 003 380. (JF)