Although state takeover of low-performing schools is not a new phenomenon in American education, it has seldom been exercised. Takeover actions exist in 11 states--Arkansas, Georgia, Illinois, Kentucky, New Jersey, New Mexico, New York, Ohio, South Carolina, Texas, and West Virginia--but only New Jersey and Kentucky have exercised steps leading to takeover. This paper provides background information on state takeovers and recommendations for the North Carolina State Board of Education as it develops state policies regarding sanctions for low-performing school districts. The first part offers an overview of sanction policies in general, including state takeovers of low-performing districts. The second part summarizes the takeover experience in Kentucky, which shares demographic similarities with North Carolina. In Kentucky, the takeover process met with local resistance and deteriorated in court legislation. A review of research and a look at the stormy outcomes of "last resort" sanctions in New Jersey and Kentucky indicate that takeovers often do little to move districts toward long-term educational improvement. Seven recommendations are offered for conducting a "clear, fair, and open" takeover process" under the following categories: (1) ensuring fairness and equity; (2) addressing building-level failure; (3) establishing an improvement-oriented sanctions process; (4) maintaining local control of schools; and (5) creating a method for quality control. The National Study Group of the Office of Education Research and School Improvement, U.S. Department of Education, advises state officials to consider a broad range of help, proceed in fair and well-defined stages, and establish a blue-ribbon independent body. (LMI)