Recent headlines have focused on plans for a court-ordered, $5 billion plus annual infusion of cash into New York City’s public education system. Nobody knows where this money will come from. Facing huge deficits already, the city and state are not in a position to come up with another dime without raising taxes. New York City’s economy is just beginning to rebound from three years of decline. An increase in taxes at this point would threaten to reverse that progress, eliminating the very jobs for which we want to educate our student population.

Whether it’s education or health care, New York manages to spend more per capita than other states, without getting equal or better results. During the last year, we got a hint of why this is the case, thanks to a costing out study performed by Standard & Poor’s for the Governor’s Commission on Education Reform. A highly regarded professional rating agency, S&P determined that many districts around New York State – not including New York City – are spending more than their fair share of education dollars.

S&P looked at the relative needs and costs in all the school districts of the state, concluding that New York City and some other rural and other inner city districts are grossly under-funded. This inequity is the result of a complex and politically driven state formula for education aid that has historically cheated the city. In other words, New York City taxpayers have been subsidizing the rest of the state as our tax dollars go through a state filter before returning back to support local schools.

The business community has long argued that New York City is shortchanged in the State education funding formula. For example, the city receives about 37% of state education aid, although it enrolls nearly two thirds of economically disadvantaged students and nearly three-quarters of those with limited English skills.

The search for additional funding for the city’s schools should start with reform of the State education funding formula. If this isn’t possible, perhaps the Legislature should consider allowing the city to retain a portion of the State income tax that the city’s taxpayers currently send to Albany.

The business community is prepared to support additional investment in education, but only in the context of ongoing reform of school governance and operations and local control of the school system by the mayor. In addition to recommending new funding for the city’s schools, the special referees appointed by the court rejected a proposal to create a new level of bureaucracy that could have diluted the reforms of 2002 that put the mayor firmly in charge of the school system.

Education is fundamentally a local matter, and mayoral control and accountability to taxpayers should be an absolute pre-condition for expanded funding. Hopefully, either a settlement or the ultimate court order regarding education funding for New York will continue to reinforce the positive direction in school reform and student achievement that has been launched over the past three years by the mayor and Chancellor Joel Klein.

One final point. While we are discussing the expenditure of billions of public dollars, it is encouraging how much Mr. Klein has accomplished with the millions he has raised from the private sector. His privately funded programs for creating small schools, new charter schools, partnerships between business and schools, and a Leadership Academy that recruits and trains school principals are making a real difference. And with relatively modest investments.

Ms. Wylde is president and chief executive officer of the Partnership for New York City.