These are tough times for schools and districts, and they will get tougher. Costs are rising on autopilot, while education revenues are declining. State and local budgets are almost certainly facing deficits over the next few years that will be even more serious than the current shortfalls. Federal stimulus funds have created some breathing room, and have helped many states fill or reduce budget gaps in the short term. This was clearly part of the intent of the stimulus package--to prevent massive layoffs in states and districts hard hit by the economic downturn. But, unless districts use these funds--and the breathing room--to plan for and invest in fundamental changes to their underlying cost structures, they will have lost the historic opportunity that the stimulus offers. Economic pressure and demand for better results are forcing districts and schools to change. To do so successfully, they must invest to revamp their underlying strategies and dismantle the old cost structures to support new ways of working. Districts have two choices--do less with less, or take dramatic steps now to ensure that despite budget gaps, they end up with a transformed system that generates better results. Education Resource Strategies has been working along with district leaders to respond to this historic challenge. This work highlights the need for districts to proceed in four key ways to make the most of federal stimulus funds and the mandate to close achievement gaps: (1) Be strategic; (2) Reallocate and invest to sustain transformation; (3) Build the case for hard but needed changes; and (4) Collaborate with the state. The districts that end up with the most competitive stimulus funds--and the districts that have the best shot at actually improving achievement for their students--will be the ones dedicated to becoming leaner, stronger, and focused on instructional improvement. They will create sustainable transformation by using a comprehensive, data-driven strategy to make tough resource reallocation choices and using ARRA funding as an investment to enable effective transition. (Contains 3 footnotes.)