This research examined the distributional and programmatic impact of the Education Consolidation and Improvement Act (ECIA) of 1981, Chapter 2, during its first year of implementation, to determine how it has measured up to meeting the goal for which it was enacted, and whether or not the Reagan Administration's promises regarding block grants have been fulfilled. A brief historical review of antecedent federal legislation is provided, followed by the legislative history of ECIA. Provisions of the act are described, along with the claims of the Reagan Administration with respect to its effects. The validity of these claims is assessed by means of a multidimensional time-series study comparing the fiscal and distributive impact of antecedent federal aid to education for fiscal years 1980 and 1981 with Education Block Grant funding for FY 1982, at all levels of the intergovernmental transfer system. Findings revealed that reductions in aid, coupled with consolidation of categorical funding into block grants, had a disproportionately adverse effect on (1) the Mid-Atlantic and Great Lakes areas; (2) states with large numbers of poor children; and (3) minorities. The stated goals of the block grants, namely to reduce wasteful spending, improve education, and increase local decision-making power, have not been met. References are included, along with statistical tables. (TE)