The 1984 legislation for public funding of Catholic schools in Ontario exposed two primary conflicting values held by different groups. An analysis of policy change in terms of value conflict, and an examination of the consequences for organizational structure and administrative practice are the themes of this paper. The context in which the change occurred is examined from the provincial, local school board, and central government levels. Newspaper coverage, supplemented by other documents and informal interviews, is the major data source. The issue of church-state separation is based on conflict between religious, political, and educational values. Rational models for change are therefore inapplicable. The change to two separate, parallel publicly funded educational systems can be viewed as the result of an exercise in political power. (40 references) (LMI)