Recognizing the interrelated nature of the standards movement, school finance litigation, and student outcomes, this study investigates the relationship of school funding and the specific outcome measure of cohort graduation rates in 16 Southern states that comprise the Southern Region Education Board (SREB). Research indicates that Southern schools may be more responsive to structural policy levers than schools outside of the U.S. South. Therefore, it is important to know how Southern states stack up against each other using a standardized calculation of graduation. Of interest, the calculation of graduation rates itself varies across states. Although some states count students who complete a GRE as a graduate, for example, others do not. The economic literature on fiscal and educational returns to high school graduates do not seem to suffer from this discrepancy. Almost all studies find tangible economic returns to high school graduates, as a function of both additional years of education and the social signals a high school degree sends about recipients--a "sheepskin effect." Recently, consensus has formed over the use of 5-year cohort measures of graduation success as an acceptable method for calculating graduation rates. Using data from the National Center for Education Statistics, this article operationalizes that calculation for all 16 SREB states; compares the derived rates to state-reported rates; classifies the SREB states in terms of their performance against this metric; and further examines relationships between educational resources, community contexts, and state policies. Overall findings indicate substantial differences between state-reported graduation rates and the rates derived from the cohort-based approach. In addition, although this research finds that district-level race and class variables are associated with decreased graduation rates and that district revenue is associated with increased graduation rates, associations between resources and cohort graduation rates are stronger within states than between--an indication that state-level context and policy approaches drive most of the variation in graduation rates once they are calculated by a similar metric. These findings imply that state-level educational policies--beyond simple investment--may serve to impact cohort graduation rates. This article reviews the policy context driving the analysis of graduation rates in SREB states, describes the data and methods used in analysis, presents findings from the analysis, and discusses implications for Southern states as they move forward. (Contains 8 tables, 2 figures and 3 footnotes.)