The 1997 Nebraska Legislature enacted Bill 806 to promote school consolidation, which legislators believed would lead schools to become more cost-efficient and provide a significantly larger curriculum. This legislative action begged the question: Has the move to consolidate schools made Nebraska schools more efficient while providing greater educational opportunities as promoted in the policy of LB 806? In this mixed-method study, the researcher investigated the impact of Nebraska legislative policies on small rural school districts in Nebraska and conducted a comprehensive efficiency analysis of these small school districts by examining both inputs and outputs. The quantitative portion of the study included 52 k-12 Class Two and Class Three School Districts with K-12 enrollment of less than 300 students: data were collected for three school years: 2003-2004, 2004-2005, 2005-2006. The qualitative element of the study utilized interviews with nine superintendents from schools included in the quantitative study. The study examined educational and financial efficiency using quantitative data to compare the following educational outputs: attendance rates, drop-out rates, state writing scores, and graduation rates and the input of cost-per-pupil of the small school sample to that of the state average using a one sample t-test. The data indicated that small Nebraska school districts had a significantly higher attendance rate than that of the state average in two of the three years of the study. The small Nebraska school districts also had a significantly lower drop-out rate than the state average in two of the three years of the study. The data revealed that the fourth grade students from the small schools significantly outperformed the state average on the state writing exam in two of the three years of the study, and in one year of the study, both the eighth and eleventh grade writing students from small schools surpassed the state average. Small school districts' graduation rates were significantly higher than the state average in all three years of the study. The small school districts were significantly lower than the state average only in one year and in one output measurement of the three year's of collected data: eighth grade writing in 2004-2005. The data indicated that the cost per pupil of small school districts was significantly higher than the state average based upon average daily membership and average daily attendance. Common themes emerged from the five categories of questions asked of the superintendents: Student Benefits of Small Schools, Community Benefits of Having a School, Challenges Faced by Small School Districts, Definition of Efficiency, and Impact of Financial Legislation on Small Nebraska School Districts. The researcher concluded that (a) small school districts significantly outperformed the state average on almost all measurements of outputs, (b) that small schools provided numerous benefits to the students they serve, (c) it cost significantly more to educate students in small school districts when looking at cost-per-pupil, (d) small schools provide a social and economic benefit to their communities, (e) that legislative policy had not negatively impacted all small school districts, (f) that legislators' definition of educational efficiency must be expanded to take into account how inputs (cost) are converted into valued education outputs. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page: http://www.proquest.com/en-US/products/dissertations/individuals.shtml.]