This paper examines factors related to the reduction of certified school personnel in Eastern Kentucky rural school districts. The economy of Eastern Kentucky has relied heavily on the coal industry, which during the past several years has suffered losses resulting in job layoffs and closure of companies. Economic distress caused a declining school enrollment. Declining enrollment indicates a need to restructure the number of schools in a district and to assess the need for personnel required for that district. Political activity and the election of new members to boards of education created new demands to generate more positions. The Educational Improvement Act, better known as the "academic bankruptcy act", allows the State Department of Education to intervene in the operation of a local school district and to limit the authority of the local superintendent and local board of education. Under this law, the state is able to take action in several areas including overseeing expenditures and employment or dismissal of personnel. Four school districts in Eastern Kentucky (Knott, Martin, Pike and Floyd counties) were analyzed concerning the reduction of personnel. It was found that although many of the problems in reducing personnel were associated with political pressures and favoritism, the primary reason was related to the fact that the school districts were the major sources of jobs in the region. Political favoritism must be eliminated and responsible operation of the schools must exist. Additional control may be taken by the state as evidenced by the recent decision of the Kentucky Supreme Court that ruled the operation and financing of schools in Kentucky is unconstitutional. (LP)