American school officials almost invariably compare local and national achievement through one of the following norm-referenced tests: (1) the California Achievement Test; (2) the Stanford Achievement Test; (3) the Metropolitan Achievement Test; (4) the Science Research Associates Test; (5) the Comprehensive Test of Basic Skills; and (6) the Iowa Test of Basic Skills. The vast majority of districts has shown steady improvement in norm-referenced test scores over the past 15 years despite the fact that other indicators of achievement do not reflect gains in American education. By early 1988 all 50 states were testing above the publisher's national norm, a phenomenon dubbed the "Lake Wobegon" effect, in reference to the mythical town where all children are above average. The survey conducted for this report in 1989 found 48 of the 50 states again scoring above the national norm, while 90% of elementary schools and 80% of secondary schools exceeded the national norm. The causes of this phenomenon (including possible cheating, deceptive testing practices, and misleading reporting methods) are discussed, and steps to avoid cheating are reviewed. A final chapter considers the effects of these inflated scores. Three appendices present: the test results from the 50 states; a survey of test security practices; and other indicators of state achievement. (SLD)