The 1981 enactment of the Education Consolidation and Improvement Act Chapter 2 (ECIA-Chapter 2), which consolidated 28 separate categorical federal aid programs into a single block grant, has had policy and fiscal impacts in Michigan. Policy debate centers on the inherent tension between equity, particularly equity defined as equal treatment of equals, and the value of choice, leaving to states and local districts the decisions on where and how to spend ECIA-Chapter 2 funds. This debate establishes the frame for more specific policy issues: the funding shifts that have occurred under ECIA-Chapter 2 and the extent to which these shifts are consistent with legislative intent. As a result of ECIA-Chapter 2, funding in Michigan has shifted away from urban core areas, from public to non-public schools, and from "innovative and creative" suburban districts. Although increases in absolute dollars is small, smaller and rural Michigan school districts (451 of 529 K-12 districts are below 5,000 in enrollment) received substantial percentage increases. ECIA-Chapter 2 also caused a four-fold increase in the dollar value of services available to non-public schools. Additionally, non-public schools located in public school districts qualifying for desegregation and low achievement factors under the formula received an additional windfall. (NEC)