The study addresses the fiscal, governance, and educational impact of the Education Consolidation and Improvement Act on elementary and secondary education in Oregon from its inception in 1983 through the 1985 fiscal year. A review of the national literature and research provided rationale for hypothesizing within state redistribution of federal aid to elementary and secondary school districts, increased federal aid to local education agencies, a continuation of decreased federal funding for state educational agency positions, and an expansion of federal aid to private schools. Interviews were conducted with Oregon Department of Education officials, members of the State Block Grant Advisory Committee, and local educators. State documents and plans were studied and analyzed. Oregon's 309 elementary and secondary school districts and seven state institution schools were classified into five recipient groups: (1) Population Center; (2) Suburban; (3) Metropolitan-Urban; (4) Rural; and (5) State Institutions. School districts gains and losses within groups and among groups were computed and reported. The study showed that the metropolitan school district of Portland and the state institution schools were the only two groups to lose federal aid in the transition from the antecedent categorical programs in 1982 to the first year block grant program in 1983 while the proportion of federal aid per-pupil allocated to suburban and population center school districts increased. The trend from 1982 to 1985 showed per-pupil distribution shaped federal aid into more of a mathematical equity distribution where the percent of federal aid has become more proportionate to the percent of pupils in school district groups. The study also found that the block grant set aside at the state level is a significant source of funds to support educational change and reform. The Oregon Department of Education has used block grant funds as a major revenue source to support the Oregon Action Plan for Excellence. The study concluded that the program had moved federal aid away from previously targeted needs and that federal aid, in the absence of strongly worded purposes and national interests, may evolve into an educational revenue sharing program. In times of economic difficulty and revenue shortfalls, the justification for continued educational block grants may be questioned.