Based on the author's research and experience with organizational decline, this speech discusses research on managing declining schools and provides a framework for thinking about decline. The long period of abundance between World War II and the middle 1970s shaped American character and accustomed its leaders, including school administrators, to judge their success in terms of growth. Most were not trained to respond appropriately to a slowing economy and declining resources. According to David Whetten, school administrators skilled in managing scarcity must be one of education's first priorities. Competition for scarce resources leads to distrust and escalated adversarial relationships and creates other personnel problems. The school districts most vulnerable are those lacking institutional vitality and effectiveness. Whetten suggests that managerial attitudes fall into four response categories: preventing, defending, "weathering the storm" or cutting back, and "generating." Proponents of the "generating" approach argue that school system leaders should view decline as an opportunity to redesign their organizations to create greater vitality and improved performance. School effectiveness research makes little overt reference to school finances, but offers managers of decline some valuable insights. In austere times, the optimistic, proactive leader can offer a new vision and help create a new school culture. Appended are 50 ideas to help superintendents generate a positive response to declining resources and a bibliography of 106 references. (MLH)