This paper discusses the Kentucky Education Reform Act (KERA) and its impact on school facilities planning and community involvement in related decision making. Since 1900, the pattern of rural school reform, nationally and in Kentucky, has been one of increased state and federal control, with cost effectiveness and equity the primary criteria in setting school budgets. As a result, school districts in Kentucky declined from over 1,000 to 176. School buildings, despite increasing enrollment, declined from over 8,500 to fewer than 1,400. Changes in the way school facilities are improved or closed have come about indirectly from KERA. KERA was enacted in 1990 in response to a class action fiscal equity suit, and replaced all previous educational legislation. In addition to fiscal and curricular reforms, KERA mandated governance reforms that include site-based decision making, state-level administrative reorganization, and revision of the state school facilities manual (the "Grey Book"). The Grey Book had frequently forced consolidation by focusing almost exclusively on economies of scale criteria and forbidding state aid for facilities construction or repairs when those criteria were not met in every building in a school district. The obvious contradictions between the Grey Book and KERA's site-based decision making led to new facilities criteria. However, there remains a cost to those districts retaining very small schools. Case studies of proposed school closings and consolidation in Henderson and Floyd Counties illustrate the revised facilities planning process but also show how local political dysfunction can overwhelm even the best schools. KERA's decentralized and participatory decision-making model may not be applicable in other states, and it is too soon to see if it will make profound differences in Kentucky. But the opportunities in KERA for accommodation of small rural schools and parent participation should be useful to small-school advocates elsewhere. (SAS)