A cost-benefit and system-analysis approach was utilized in an effort to study the quality of education in the State of Kentucky. This first report of that 2-year study relates: background information problems of measuring quality; methodology employed; rankings of the 197 school districts; and the input, output, and process variables. Two different rankings are presented, one on the basis of all 19 variables examined, and the other on the basis of the 5 output variables considered. Conclusions and interpretations are drawn from profile analyses of each of the 197 school districts. The appendix contains a literature survey of other studies pertaining to quality education in Kentucky. A list of references concludes the document. (SW)