This paper describes New Jersey's efforts to measure the performance of local school districts, efforts which include developing indicators of success and monitoring guidelines and certification standards. Specifically, this report compares and contrasts the ways in which local districts responded to being placed in "Level III"--a category for school districts that did not meet state performance criteria. For the most part, objections were widespread. Most district administrators were in agreement that urban school districts were penalized because of their large economically disadvantaged minority constituencies, dismayed by the negativity demonstrated by the New Jersey Department of Education, chagrined that the state chose only quantifiable measures, and disappointed that the state made no provisions to fund needed district improvements. The conclusion that New Jersey can initiate other evaluative models that do not punish and label school districts leads to the following recommendation for revision: that New Jersey do away with "compliance" monitoring in favor of "diagnostic" monitoring. (JAM)