Much of the coal development in eastern Montana has occured in or is proposed for sparsely settled Rosebud County, which includes the Colstrip elementary and high school districts. Between fiscal 1966 and 1975, the population growth resulting from coal activities has brought about a 68% real increase in Rosebud County expenditures. Increase in Colstrip elementary and high school district expenditures is expected to amount to 395% and 177% respectively from fiscal 1966 to 1976. The taxable valuation of county property has also skyrocketed 132% during this period. Nevertheless, some hardships have occurred; schools have sometimes been overcrowded and residents have paid high total property tax mill levies. Although some additional problems may occur if the proposed Colstrip III and IV plants are constructed, expectations are that prosperity is just around the corner for both the county and the school districts. This prediction is made because the tax base will be large enough to keep mill levies low, and 1975 changes in state law allow a portion of the Coal Mines License Tax revenue to be returned directly to the counties from which the coal was mined. This analysis is concerned with the fiscal effects on the school districts and county since coal development began in 1966, with the present Montana tax system and how it affects local governments, and with the probable fiscal impact of the construction of two more coal-fired electrical generating plants. (NEC)