The Independent Budget Office says city schools are getting funding that more closely matches their needs.
A Department Of Education initiative called "Fair Student Funding" created a formula for student needs and gradually began dispersing funds to city schools based on that five years ago.
Money allocated through the formula makes up the majority of a school's budget, and the IBO found the city is getting closer to its goals.
Middle schools, who were historically funded below the formula, and high schools, who were funded above the formula, were closer to their formula amounts by the 2011-2012 school year.
Despite the success, IBO officials say 94 percent of schools are still receiving too little money based on the needs of their students in 2011-2012.
DOE officials say the report speaks to the "tremendous work we have undertaken."