Demographic projections from the California Department of Finance (DOF) suggest that California's public K-12 school system is entering a long period of declining enrollment. Districts with declining enrollment face fiscal pressures, as state funding is tied to the number of students they serve. Declining enrollment also has important implications for the state budget. To help policymakers understand the effects of declines over the coming decade, the authors looked at recent district-level enrollment declines and assessed their consequences for districts as well as the state budget. Findings include the following: (1) Most district-level declines in student enrollment are large and long lasting; (2) District downsizing in response to enrollment declines does not necessarily lead to budget savings; (3) Shrinking districts are cutting total expenditures but spending more per pupil; (4) State spending on the declining enrollment adjustment will continue to increase; and (5) Declining enrollment could boost statewide per pupil funding. Though most enrollment declines cannot be prevented, early awareness and planning can help districts adjust gradually and avoid larger, more difficult spending cuts. [This report was written with research support from Radhika Mehlotra. For the technical appendices to this report, "Declining Enrollment in California Schools: Fiscal Challenges and Opportunities in the Coming Decade. Technical Appendices," see ED603727.]