This study examines the politics of program implementation in Michigan. It focuses on relations between the Michigan Department of Education and the state's local school districts in the administration of state aid for compensatory education. With its accountability emphasis and with the many administrative issues that have characterized its development over the years, the Michigan program offers an instructive test of the leadership capacity of the state education agency. The article focuses on the interplay of state and local power in determining the direction of the compensatory implementation process and the effect of an administrative bargaining game on interpretations of the law. The Michigan data is examined in terms of Morton Grodzins's "sharing" interpretation of intergovernmental relations in which a structure of fragmented, yet coordinate, government supposedly ensures both central control and diversity. The discussion reveals the obstacles to reform that are inherent in the sharing argument. Only by establishing mutually supportive client-administrator relationships, by tempering leadership demands on the local schools, and by preventing the development of damaging state-local conflict could the department of education assure the continuation of its compensatory education idea. (Author/IRT)