California's population will increase more rapidly than the United States population as a whole, as immigration plays a larger role in population growth and California accepts over one-third of all immigrants to the U.S. The state's population will also change as it is becoming older and more ethnically diverse. As this report shows, these changes are challenging California's school system, which accounts for nearly 55 percent of the state's budget expenditures. The school-age population between 3 and 24 enrolled in school should increase almost 50 percent between 1980 and 2030. By 1990, Anglos will no longer comprise a majority of this population; by 2015 there will be more Hispanic than Anglo students and more Asian than black students. California schools must cope with growth and ethnic diversity by creating better dropout prevention programs, improving Hispanic and black students' academic achievement, training a sufficient corps of effective teachers, and determining the schools' proper roles in enculturating immigrants and their descendants. It is unclear whether California will continue to increase educational funding or concentrate on divisive debates over bilingual education and other issues as the state's population changes. Schools will play an even more important role in California's future economy, because a service economy requires "knowledge" workers. If schools continue to lose 20 to 30 percent of their students as dropouts, they impose remedial training costs on business and society. Chapters are accompanied by numerous tables and references. An appendix presents demographic assumptions. (MLH)