This report analyzes the state's system for financing school facilities and raises concerns with the existing system. We recommend the Legislature replace the state's current system for financing school facilities with a new system. Specifically, we recommend the Legislature: (1) establish an annualized "expected facility cost" based on the replacement cost of existing school buildings; (2) provide an annual per-student grant that reflects a specified minimum state share of cost; (3) adjust the grant for differences in local resources; (4) adjust the grant during the transition period for prior state investments in school facilities; (5) provide one-time funding to address the existing backlog of school facility projects; and (6) require grant recipients to adopt five-year facility accountability plans.