All principal preparation and professional development programs operate within a local, state, and national policy and financing context that influences their structure, shapes their priorities, and, in some cases, dictates their existence. Financing and policy directly affect how much professional development for principals takes place, what kind, who participates, who pays, what impact it has, and if and how programs are held accountable for their results. Decisions regarding policy application and resource allocation are made at a number of levels and by an assortment of actors with a variety of educational policy priorities, making it difficult to fully understand how the many different parts of the system are working--either cohesively or individually--to create the overall policy and financing context for principal preparation and development programs. This paper focuses on state-level policies and the financing of local initiatives in selected sites. In this paper, the authors present work done as part of a study of innovative principal preparation and professional development programs funded by the Wallace Foundation and carried out through a partnership between Stanford University and The Finance Project. As part of the study, The Finance Project is collecting and analyzing information on the costs of a selected sample of initiatives and on relevant state policies and programs. Their work to date has focused on developing a framework and tool for collecting and analyzing cost data and piloting this approach in three sites. They have also interviewed a variety of education policy experts in the states in which the study programs are located, as well as in selected additional states, to gain an understanding of the policy and fiscal environments in which these programs are operating. In the first part of this paper, the authors present the framework they are using for collecting and analyzing data about cost and illustrate the application of this framework with data from the subset of study sites they have visited. In the second part of this paper, they examine ways state policies influence professional development for principals and describe selected policy initiatives taking place in the states highlighted in the study. Because this study is still ongoing, the data and findings presented herein are based on work conducted to date under this project, and should be considered preliminary. (Contains 1 table and 10 footnotes.) [This paper was commissioned by The Wallace Foundation. For the main report, "Preparing School Leaders for a Changing World: Lessons from Exemplary Leadership Development Programs. School Leadership Study. Final Report," see ED533003.]