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This paper analyzes Israel’s school finance policy (SFP), based on statistical measurements of horizontal and vertical equity and on qualitative analysis revealing trends in legislation, Ministry of Education publications, the Israeli parliament’s Education Committee protocols, reports on national spending on education, and school budget-allocation mechanisms. The results reveal low levels of horizontal and vertical equity in the total per-student allocation, and demonstrate a high level of inequality across localities. These empirical findings contradict the equitable spirit of Israel’s ‘Law of Education’. Moreover, the results of the qualitative analysis show tensions between the de-jure and de-facto layers of educational policies and their implementation, leading to counter-effective outcomes for SFP reforms aiming to raise achievement and narrow down gaps