As a consequence of declining enrollment and decreasing public school revenues, coupled with cost increases linked to state and federal mandated programs, collective bargaining obligations, rising energy costs, and a larger proportion of high cost (disadvantaged) students, administrators are faced with a compelling need for cutbacks in expenditures, but there is little hard empirical evidence to guide them in their decisions. The only guidance comes from a consensus of prescriptive advice: (1) plan retrenchment decisions in advance, rather than reacting to contingencies; (2) close schools before you cut instructional programs, striving to maximize savings while minimizing adverse impact on the community; and (3) use merit and equity criteria to reduce staff, while recognizing the inevitability of seniority-based criteria. The problem is that this good advice is difficult to follow on account of conflicts between political expediency, feasibility, and educational soundness of the various options. Therefore, a long-range systematic planning approach is suggested, involving new and improved management practices, diversification, and flexible personnel policies. A steady decline in available resources necessitates organizational change and reassessment of major goals. (TE)