The issue in government treatment of nonpublic education has never been whether governments should finance or regulate nonpublic schools, but rather how and how much, according to the author. This paper explores financial and regulatory policies shaping government involvement in nonpublic education. It first examines the types and magnitudes of government aid to nonpublic schools, including indirect aid through tax policies and direct aid through fiscal policies. Discussed under direct aid are state programs, including transportation services, handicapped education, textbook and instructional materials, and health and welfare services; Federal programs, involving compensatory education, child nutrition, auxiliary services, special education, and science; and local programs, involving "child benefit" programs using public school resources and dual (public and nonpublic) enrollment programs. After assessing the relative importance of government aid, the author analyzes government regulation of nonpublic education. Regulations both independent of public aid and ties to public aid are reviewed. The regulations independent of public aid involve the regulation of general business practices and the regulation of educational practices, including state compensatory education standards and requirements for minimum curricula and teacher certification. Policy options, including tax credits and vouchers, are discussed in the paper's conclusion. (RW)