As the school year begins, the curtain’s almost down on the education tragicomedy in Albany, and the city schools should soon get their court ordered wish: an infusion of billions of tax dollars, courtesy of the historic school finance lawsuit against the state.

Now comes the hard part: what to do with it. Know those stories about middle-class Americans who sink into depression after winning the lottery? Well, a similar fate could befall our city if it deludes itself into thinking that a huge briefcase of money is going to transform classroom learning.

Of course, money matters – but it’s never been enough, especially when a city is saddled with an education bureaucracy as big and often as ineffective as New York City’s. What is far more important than the price tag are the priorities.

To their credit, the mayor and chancellor seem to have understood that to this point. Their most ambitious plans have focused on shifting resources and priorities rather than demanding huge new investments. With that same spirit – treating every taxpayer-dollar with respect and prioritizing the most significant reforms – it’s time for city and state school leaders to set aside their wish-lists and present the public with a clear to-do list of the spending that will make the biggest and most immediate difference in the lives of our kids.

Here’s where common sense should guide them to begin, along with back-of-the-envelope cost estimates:

1. Raise pay – the smart way. This is the big-ticket item, figuratively and literally. Research makes clear what parents know from experience: Quality teaching is the single biggest determinant of student learning. And the dollar figures back that up: About half of all school spending goes to teacher salaries. But when we raise salaries in a way that feeds the beast that is the lockstep pay-schedule that’s been forced on the system for generations, we reward only seniority – not excellence.

The new money needs to be focused on making a real difference: increasing entry-level pay, which currently keeps too many aspiring professionals away from the classroom in the first place; upping pay in the schools that serve the poorest students to attract the best teachers there; offering bonuses for shortage subject areas such as math and science; and putting in place a system that distinguishes the best teachers from the worst and gives real rewards for exemplary performance.

If all that happens and tenure finally bites the dust, when all is said and done, every teacher in the system will make more money – and the best teachers will make a lot more money, perhaps even more than the chancellor. Approximate cost: $1.5 billion for targeted bonuses, negotiated as part of the new teachers’ contract, and $10 million for a state-of-the-art, private-sector developed assessment system to help teachers and administrators hone in on individual student academic gains.

2. Teach more. Teachers in New York spend less time in front of students in the classroom than teachers in other major American cities. Rather than going overboard on voluntary after-school programs, New York should be leading the nation in instructional time – with an extra 40 minutes of instruction every day for every student in the city. Students who are struggling in reading will get intensive English instruction. Gifted and talented students will get enrichment. Approximate cost: $1 billion.

3. Start earlier. Getting kids ready for school will pay off down the road. The mayor should continue to lead the push to add a year of full-day pre-kindergarten for all. But there’s no reason that the government should be the sole provider. Across the city there are terrific pre-schools that, if they meet set standards, should be eligible to receive new, need-based early education vouchers. Approximate cost: $1 billion.

4. Choose choice. Accepting that a large-scale public and private school voucher experiment is probably politically impossible – for now, anyway- school reformers need to try full public school choice in at least a few of the city’s 10 regions. The chancellor is right that transfers in some cases are out of the question today because of inadequate capacity. Money, smartly spent, can fix that, while making the moral case that there is simply no justification for forcing low-income families unlucky enough to be zoned for an abysmal school to send their kids there year after year. Approximate cost: $500 million.

5. Ditch the decrees. It’s long past time the city launched an all-out effort to once and for all get the city schools out from under court orders that make it almost impossible to reform bilingual and special education. It would be ironic – but not surprising – to see two existing federal court agreements throw a wrench in the city’s ability to meet its state constitutional obligation to provide a “sound basic education.” Approximate cost: a modest $3 million to $5 million to hire a top-flight team of lawyers and task them with this responsibility.

6. Reward the teachers’ leaders. Teachers shouldn’t be the only ones with the opportunity to earn more money for excellent performance. The mayor needs to build on the timid merit pay plan that’s currently in place for principals. Those with the best track record of managing their schools effectively and improving student achievement should get significant sums of money. Shouldn’t the very best frontline teachers and principals make more than the administrators working inside the schools? Cost: Giving the top 100 principals and assistant principals bonuses of $10,000 apiece -and the top 10 principals in the system double that – would cost just over $1 million a year.

7. Don’t forget tech. Information technology and biotechnology are the present and the future. New York City schools should commission the private sector to design and build 10 tech-learning labs throughout the city – genuine next-generation centers where kids, whether rich or poor, can learn about computing and the other industries that will shape their lives. Approximate cost: $50 million.

So the question remains, 10 years from now, will we look back on this windfall as a nice, cool breeze that made everybody feel good, or as the impetus that intensified the winds of change and forever changed the system?

The choice is up to the mayor and chancellor: Spend boldly on meaningful priorities or spend warily on business-as-usual ideas. Assuage the critics of school reform or up the ante once and for all.

Mr. Greenman, formerly an education policy adviser and speechwriter for Mayor Giuliani, recently served as chief speechwriter for Senator Lieberman.