Because of misconceptions regarding appropriate measurement strategies, it is necessary to draw distinctions between two major measurement methodologies, norm-referenced and criterion-referenced measurement, as they relate to determining basic academic capabilities. Norm-referenced measures are used to ascertain an individual's performance in relationship to the performance of other individuals on the same measuring device. Criterion-referenced measures are used to ascertain an individual's status with respect to some criterion, that is, an explicitly described type of learner competence. Because of the wide use of norm-referenced standardized achievement tests, many assume that they are the only instruments that should be used to find out how well a school is working or a pupil is learning. But typical standardized tests are unsuitable for these purposes because of problems with their interpretability and their psychometric properties. Criterion-referenced tests remedy some of these weaknesses because they can: (1) be more accurately interpretable; (2) detect the effects of good instruction; and (3) allow us to make more accurate diagnoses of individual learners' capabilities. If sufficient care is taken to support the development of high quality criterion-referenced measures, legislation to distribute federal funds on the basis of educational deficiencies rather than census determiners appears to be sound. (Author/KM)