This study examines cases of overlap between federal Chapter 1 and Chapter 2 programs as reauthorized in the Hawkins-Stafford Elementary and Secondary School Improvements Amendments of 1988. Both chapters emphasize the creation of more effective schools through similar approaches. The study sample includes three states (Connecticut, Arkansas, and Pennsylvania) and 14 local school districts, most of which were using Chapter 2 funds to support Chapter 1 program improvement. The results show that Chapter 2 support for Chapter 1 program improvement in the sample states has positive short-term effects. The following benefits were observed: (1) local schools and districts receive support needed to reform services for low-achieving students; (2) state departments of education are able to support improvement efforts in their state's neediest schools; and (3) coordinated use of federal dollars targeted on improving the educational opportunities of children in poverty meet a central federal goal. However, these efforts are limited. No other states are known to be using funds in this way, and within these three states few districts are involved. Findings suggest that the Federal Government should not require Chapter 2 to support Chapter 1 and perhaps thereby cut off these creative, coordinated uses of federal funds. This document contains five tables and two figures. An appendix describes the study sample and data collection procedures. (JB)