A strategy for revitalizing public education by stimulating the creation of new public schools is proposed in this report. The proposed system goes beyond school choice and is based on the withdrawal of local districts' exclusive franchise to own and operate public schools. The proposal is based on the premise that the state must provide both "choice" and "choices"--granting choice of school as well as providing alternatives to public schools. The new system for chartering schools would allow enterprising people to open innovative schools under contract to a public agency. Also examined is the notion of "divestiture," or allowing districts to relinquish operation of public schools while retaining a broad policy-setting role. This proposal for fundamental educational reform is based on the following assumptions: (1) school restructuring has limited potential; (2) school districts' monopoly on public education is the heart of the problem; (3) the states are critical actors in revitalizing education; and (4) a competitive school system requires a variety of agencies that are free to charter new schools. The final section offers 11 guideposts for creating a competitive but publicly controlled and service-oriented public school system. (LMI)