This review of the literature focuses on the effects of enrollment and fiscal decline on local school district management and also looks at the effects of local districts' policy responses to decline. The review's five sections include an overview of the kinds of literature available on decline; a summary of the main policy issues identified in the literature; a codification of the professional consensus on how best to manage decline; a review and summary of the research literature on local school systems' management of and adjustments to decline; and a discussion of the policy implications of those research findings, paying special attention to the trade-offs between the requirements of technical rationality and the political constraints facing declining school systems. The review is based on a comprehensive search of the literature in the ERIC system through July 1981 and serves as the first report in a 15-month project that will produce a handbook in August 1982 on the management of decline in school systems. An extensive annotated bibliography of 250 items, including 28 reports documenting local school districts' responses to decline, accompanies the review. (Author/PGD)