The effects of Chapter 2 block grants on fund distribution, programs, and school district spending, and the role played in Chapter 2 implementation by parents and citizens were investigated. Interim findings include the following: (1) there has been a massive redistribution of Federal funds away from States serving large numbers of poor nonwhite children; (2) small school districts are winning small amounts of money, big districts are losing very large amounts; (3) there has been a pronounced shift away from support of competitive grants in local districts for school improvement projects; (4) 88% of local districts are spending more than half of their grants for materials, about 30% are supporting school improvement projects, and about 15% are supporting guidance and testing programs or programs for the gifted; most other categorical programs are not being funded at all by most school districts (only 5.7% are funding desegregation programs); and nearly 50% are spending money on computers. Following presentation of these findings, the role of the state education agency (SEA) and of the State advisory committee (SAC) is analysed and seven case studies (written by parents or educational activists) describe how SACs have served (or not served) as vehicles for public involvement in California (Myron Puckett); New Jersey (Vernell Patrick); Ohio (Carla Edlefson); Rhode Island (Eleanor King); South Carolina (Joy Sovde); South Dakota (Phyllis Willging); and Washington (Pamela Keating). Appendices present State demographic material, material on funding formulas and SEA Chapter 2 spending, Chapter 2's text, and nonregulatory guidelines on public involvement. (CMG)