School finance reform plans have not been accompanied by research demonstrating that they will result in fundamental changes in educational quality. The objective of this study was to quantify school district quality measures and to assess the effects of expenditure levels on these factors. The source of data was the New York State Department of Education consolidated data base. School districts were arranged by expenditure level and the top and bottom 10 percent were assessed. Results revealed an expenditure gap between high expenditure districts and low expenditure districts of $1,150 per pupil in 1976-77. High expenditure districts had a 1/21 teacher/pupil ratio while low expenditure districts had a ratio of 1/16. The high expenditure districts had more teachers with degrees above masters and more mature teachers who stayed longer in their positions. Low expenditure schools had more pupils below the norm for their grade level in reading and math. More high expenditure students took the Regents Exams, scored high marks, and won scholarships. These findings imply that tax equity schemes must attempt to equalize both expenditures and educational quality. They may be the basis for both a new type of foundation program and a true educational production function. (Author/JM)