Existing literature on educational inequality in China has been preoccupied with large regional disparities. Inter-school inequalities at the local level have been, however, largely ignored. The authors present clear and strong evidence that such inequalities are also large and more entrenched than expected, despite reform efforts since 2006 to increase transfers from the central and provincial governments for schools in poorer areas. Using school-level data from a province in western China, the authors have found that immense inter-school disparities exist in per student government funding within rural counties and urban districts, and that the disparities are considerably larger in more developed counties or districts. More surprisingly, inter-school disparities increased between 2009 and 2013 in nearly every selected county and district. This study highlights the imperative to bring the issue of locally maintained educational inequality to the forefront of academic research and the policy agenda.