Limitations on governmental taxing and/or spending, exemplified by the "Proposition 13" initiative in California, have been instituted or proposed in a large number of states. As the movement spreads, state education agencies (SEAs) and, especially, chief state school officers have fundamental policy decisions to make. Areas where the tax/spending limitation movement most directly affects education are: (1) SEA posture (opposition/acquiescence), (2) relationships with other agencies and organizations, (3) changes in governance patterns, (4) changes in SEA functions and operations, (5) institution of economy measures, and (6) increase of productivity. Drawing on the experience and insight of state education leaders, this document presents an analysis of the policy dimensions of the tax/spending limitation movement, setting forth the policy problems in each of the areas listed above and reporting identified policy options for addressing these problems. (MLF)