Students not reading proficiently by the end of 3rd grade are four times more likely than proficient readers to drop out of high school. This fact and other recent research on the importance of early literacy skills have culminated in an intense focus on improving 3rd-grade reading proficiency. The challenges of improving literacy are, in turn, causing more state leaders to confront the difficult question: "Should students who do not have the requisite knowledge and reading skills to succeed in the next grade be retained? The growing number of state initiatives aimed at addressing 3rd-grade reading proficiency includes three elements: (1) Early identification of reading difficulties; (2) Interventions that occur as close to the point of need as possible; and (3) Retention. In this paper, the authors address the strategy that is causing the most angst across the states: retention. They also stress the importance of and need for early identification and intervention strategies. To illustrate, they describe the experiences of both Florida and New York City. Finally, they outline strategies to help ensure that a far greater number of young readers leave the early grades at a proficient level of knowledge and skills. Appended are: (1) Florida's "Good Cause" Exemptions for students scoring below a 2 on the FCAT (Florida Comprehensive Assessment Test); and (2) Percentage of students in OECD countries reporting that they have repeated a grade at least once in primary, lower secondary or upper secondary school. (Contains 27 endnotes.) [This paper was supported in part by Pre-K Now. For the summary report, "Third Grade Reading Policies," see ED535948.]