This document reports findings of a California Department of Education (DOE) study that examined grade-retention practices in the state. Data were collected primarily through surveys of schools and school districts. Findings indicate that approximately 1 in 10 students spent an extra year in school before second grade during the 1988-89 school year. In kindergarten and first grade, the retention rates for African-Americans and Hispanics were up to double the rate for whites. The most common treatment for retained students was grade repetition. Despite research findings to the contrary, most educators believed that retention was effective. Many educators used Light's Retention Scale, an instrument that lacks reliability and validity in identifying students for retention. The following alternatives to retention are identified--dissemination of research, developmentally appropriate instruction, the Reading Recovery Program, other intervention programs, the Success for All Program, and structural changes (such as combination classes, year-round education, and ungraded schools). Several recommendations are offered to reduce the statewide retention rate: (1) School districts and schools should examine their policies and practices in light of current research; (2) school districts and schools should disseminate research on retention to elementary and middle school staffs; (3) school districts with high retention rates should develop a plan to reduce the rate and improve the instructional program for at-risk students; (4) school districts should monitor the differential effects of retention for different ethnic groups, non-English-speaking children, and boys and girls; and (5) the DOE and state legislature should provide support to school districts to implement early intervention reading programs. Two figures are included. (LMI)