Michigan has a problem. By several measures, the achievement of students attending its K-12 educational system has not kept pace with other states. Although Michigan's student achievement has improved over the past decade, the improvement has been modest, and achievement in many other states has easily surpassed that in Michigan. Furthermore, despite a funding system based on an equitable allocation of resources, Michigan has persistent gaps in achievement across income groups that have not narrowed over time. These trends have grave consequences for the future of Michigan's children as well as for Michigan's economy. This study focuses on the financing of K-12 education in the state. After a brief introductory chapter, the second chapter of this report explains how Proposal A, the current funding mechanism in the state, radically altered the funding of K-12 education in Michigan's school districts, reviews studies of the influence of that funding change on student achievement -- including supplementary analyses by the research team -- and points out the unintended consequences of Proposal A. Following the background chapter on Proposal A, the next chapter of this report examines student achievement in Michigan and other states. The cross-state comparisons use National Assessment of Educational Progress (NAEP) data, which is the only source of information that can be used for this sort of comparative analysis. In addition, the authors use Michigan Educational Assessment Program (MEAP) data to examine student achievement results in Michigan that extend beyond previous studies. The chapter also addresses the methodology and data that was used to select seven exemplary states that may hold useful lessons for Michiganders. The fourth chapter delves into education financing. It provides detail about the mechanisms used in other states, with particular emphases on the seven states identified as exemplary in student achievement. The chapter also examines how and why recent reforms have been undertaken. Finally, it reviews studies that have shown how these and other school finance reforms have affected student achievement and other outcomes. The final chapter of the report focuses on recommendations based on the authors' analyses and review of existing evidence. [Financial support for this research was also provided by the Steelcase Foundation.]