This report contains the findings and recommendations of the California Legislative Analyst concerning the Native American Indian Early Childhood Education program. The program was established in 1972 to increase competence in reading and mathematics among American Indian students in California rural schools by intervening in prekindergarten through grade 4. In the 1986-87 school year, the program served 1,130 students in grades kindergarten through 4 from 23 schools in 11 districts. No prekindergarten projects were funded. Typically, the program provided supplemental services during regular school hours or tutoring after school. In analyzing the State Department of Education's (SDE) report on the program, the Legislative Analyst makes the following findings or criticisms: (1) an additional 2,400 students could potentially qualify for the program; (2) contrary to SDE policy, participating school districts use 2 to 5% of their state allocation to pay for indirect local administrative costs; (3) the SDE allocates funds based on the project rather than the number of students served, and the SDE favors renewal of current projects to the exclusion of new ones; (4) federally-funded Indian education programs provide some overlapping services to the same client population; (5) the SDE offers no specific evidence of the need for this program; and (6) there have been no evaluations of program effectiveness in the last 10 years. The Legislative Analyst recommends an extension of the program termination date to June 30, 1989, pending the completion of a comprehensive program evaluation by the SDE and the development of specified model projects that meet program goals. (SV)