This report reviews implementation of Phase 1 of the New York City Board of Education's Performance Driven Budgeting (PDB) initiative from 1997-00. This initiative generated a new element in school-based planning for instructional improvement, explicitly linking school-level budgeting and efforts to improve student and school performance. The evaluation examined PDB's underlying theory: schools will improve student academic performance if they control all the components of their instructional planning, particularly budgeting. Researchers conducted structured interviews with senior staff at the central, district, and school levels; observed participant meetings at all three levels; conducted focus groups and informal interviews; analyzed documents; and surveyed planning team members in 23 of the 61 pilot schools. The study assessed the impact of PDB on student academic performance. Results indicated that the PDB produced a new budgeting system in which school-level decision making was driving change upward through the district and central fiscal systems. On the instructional side, the central administration Comprehensive Educational Plan contributed to improved instructional planning in all the system's schools. There was initial indication that academic outcomes in PDB schools improved relative to non-PDB schools. Appendixes contain research materials and data on principal turnover in PDB districts. (SM)