This document reports the results of the National Study of Local Operations under Chapter 2 of the Educational Consolidation and Improvement Act of 1981. The 2-year study sought to (1) describe local district activities and operations under Chapter 2, the first federal education block grant, in the program's third year, noting changes occurring over the 3 years and changes from antecedent categorical grant programs; (2) assess the program's achievement of such federal legislative goals as educational improvement, reduction of administrative burden, and increased local discretion; (3) determine the influence of block grant mechanisms on local district activities; (4) identify local and state methods for evaluating Chapter 2 programs; and (5) develop recommendations applicable to future federal policy. The study was organized around eight topics, each representing a purpose of the legislation or a set of issues regarding block grant mechanisms: (1) fund allocation and expenditure; (2) education service delivery; (3) local program administration; (4) local decision making; (5) parent and citizen involvement; (6) evaluation; (7) participation of private school students; and (8) intergovernmental relations. Data were collected through a nationally representative mail survey, a followup telephone survey, and site visits to 24 school districts and 8 state education agencies. This report is introduced with a discussion of the block grant, existing research on the grant, and a conceptual model of the grant and its implementation. The report then summarizes the findings of the study, except for those concerned with evaluation methods. Separate reports are available discussing the findings relative to evaluation and providing greater detail concerning the achievement of legislative goals and the effects of block grant mechanisms. Ninety tables support the text. Appendixes provide error values for the tables, a listing of antecedent programs consolidated under the block grant, the text of the Chapter 2 legislation, a listing of previous studies conducted on Chapter 2, a description of the study methodology, and the mail survey used. (PGD)