The RAND Institute on Education and Training in consultation with the Committee on Education and Labor of the House of Representatives undertook an analysis of federal policy options to improve education in low-income areas. The analysis focuses on Chapter 1 of the Elementary and Secondary Education Act of 1965, drawing on a comprehensive review of evaluation data; invited commentary by 91 policymakers, researchers, and educators; and a commissioned study of federal options for school finance equalization. This volume, first of three, assesses the current Chapter 1 program and describes a strategy for reformulating the program to encourage fundamental improvements in the quality of education for low-income students. Three basic changes are recommended: (1) increasing Chapter 1 funding for the nation's lowest-income school districts and schools; (2) encouraging fundamental improvements in the quality of education available to low-income children of all achievement levels; and (3) using a separate general aid program to provide incentives for equalizing overall funding within states. These fundamental changes will require a new concept of accountability and a new approach to achievement testing. One figure and three tables illustrate the discussion. (Contains 48 references.) (SLD)