This paper poses and responds to 10 questions about the policy issues affecting state education agencies raised by the federal government's plans to reduce expenditures for education and to consolidate several categorical aid programs into two major block grants. These 10 questions focus on the shifting relationships among and responsibilities of state and local education agencies and the means for maintaining compliance with the various applicable regulations as laws regarding funding and responsibilities change. The questions also touch on the definition of "local education agencies," the impact grant distribution formulas will have on educational opportunity equalization efforts, and methods for ensuring the supplementary nature of federal funds. Finally, the questions concern alterations in the character and influence of advocacy groups at state and local levels, the impact of reductions in federal support on local tax burdens, and the capacity of local districts to manage the resources newly placed under their control. (Author/PGD)