Although there is disagreement among educators about performance standards and their relationship to student performance, performance standards are central to the reforms under way in many states and large school districts, including Philadelphia. They are also mentioned explicitly in the Goals 2000: Educate America Act and in the re-authorization of Title I. Without a clear understanding of the issues surrounding performance standards and assessments, including their potential uses and their impact on a variety of populations, the implementation of a performance-standards and assessments-based system could harm the group that is most affected--students. This paper identifies and briefly discusses 16 policy issues that must be considered when developing a performance-based standards and assessment system. These issues include the following: (1) purposes(s) of standards/assessments; (2) method(s) of standard-setting to use; (3) types of judges to use for setting standards; (4) numbers of levels to set; (5) who determines final standards; (6) conflict between local, state, and national standards; (7) impact of standards/assessments on what is taught; (8) impact of standards/assessments on how teachers teach; (9) changes in school grading systems; (10) relationship between standards and assessments; (11) opportunity to learn; (12) impact on "special" populations; (13) school-based management versus central control; (14) "world-class" standards versus minimal competency; (15) information dissemination to the public and teachers about standards/assessment; and (16) sequence of development. (Contains 15 references.) (LMI)