The Hawkins-Stafford Elementary and Secondary School Improvement Amendments of 1988 (Public Law 81-815) provides federal funds for constructing and renovating schools in districts that educate "federally connected" children, such as those whose parents live and/or work on military installations and Indian reservations. A study was done to review the program for school districts affected by federal activities. Data were collected from a random sample of 58 of the 178 unfunded Department of Education projects from fiscal year 1988. Department records show that as of fiscal year 1988, the estimated funding gap was about $200 million. The Department's criteria for computing priority numbers of eligible projects and ranking projects are equitable, but the Department does not periodically reevaluate these scores once projects are ranked on waiting lists. It is recommended that: (1) Congress amend Public Law 81-815 to require that school construction payments to eligible districts be based on average state per pupil construction costs; and (2) that the Secretary of Education require school districts to apply annually for school construction aid to ensure that project requests reflect current data. It is further suggested that Congress might want to consider authorizing the Secretary of Education to distribute appropriations among a greater number of projects. (MLF)