State policies greatly affect the decisions rural districts make about building or renovating school facilities. State, federal, and local mechanisms for funding school facilities are briefly described. Some states require a specific percentage of growth or decline in student population or a minimum number of students as a prerequisite for funding. Such policies ignore the many diseconomies of large-scale facilities and often force consolidation of small rural schools. In many small rural districts, population loss erodes the tax base, and taxpayers are reluctant to pass bonds to build schools. Population growth can increase property tax income but may also compel the community to incur more debt to house new students. Policies that require substantial acreage for school facilities may force districts to select sites away from population centers, creating large schools dependent on buses and automobiles. Even if the land is donated, bringing infrastructure to the site can be expensive. Few states fund maintenance, so districts often defer needed work, resulting in costly repairs or loss of buildings. In several states, districts are ineligible for renovation funding if estimated costs exceed a specified portion of new construction costs. However, estimates may exclude the value of the existing buildings, land, infrastructure, and intangible assets such as status as a community hub. Some states require an approved facility design, but adapting a site to a plan instead of creating a plan for a site may incur excessive costs. Community participation in the planning of a school helps assure support and long-term investment in the facility. (Contains 11 references.) (TD)