The Nebraska educational system is experiencing internal turmoil even though its students are highly ranked nationally on standardized tests and show a higher ratio of graduating high school than those in most other states. This report was commissioned by Nebraska education officials who were concerned that their state was not taking a large enough role in new, innovative methods of rural education. In the form of a discussion of the "Rural Education Debate" in Nebraska, the paper suggests that school consolidation is an uncreative and inefficient ways of solving service delivery problems. It also questions once-popular views linking teacher performance and overall school quality to school size, number of courses, and amount of materials. This document argues that the limited but focused curriculum in rural schools should be able to compete successfully with larger systems. For example, Nebraska's rural districts have relatively fewer dropouts compared to non-rural districts, and their rural schools also match larger ones in standardized test performance. This document discusses the relationship between school size and efficiency, concluding that comparisons of per-pupil expenditures inherently discriminate against all rural school systems, which are small by necessity but are not therefore inefficient. Socioeconomic influences at work in Nebraska result in a widening of the rural-urban political rift. This report recommends a thorough overhaul of the school financing system and calls for creation of appropriate educational standards, not standardization. It closes with a discussion of rural and urban differences and the implications for their respective educational systems. (TES)