This paper defines site-based budgeting as a tool for restructuring schools through meaningful participation. It also describes the legal dimensions of site-based budgeting, with an emphasis on Texas. The following legal principles are discussed: public oversight of public dollars, deregulation of governmental powers, equal protection, preservation of fiscal accountability, integrity of categorical programs, and liability. Texas' school-budgeting plan is used as an example of a negotiated, deregulated/decentralized budgeting system. Four major legal implications for site-based budgeting include: (1) preserving fiscal accountability; (2) maintaining economies of scale and district efficiency; (3) maintaining the integrity of categorical services; and (4) possible liability of the members of decision-making bodies. A conclusion is that an increase in local control could conceivably be gained at the expense of centralized economies, fiscal accountability, and constitutional and civil rights. In addition, there is no guarantee for the effectiveness of decentralized budgeting practices. A modified decentralized process is advocated, which strikes a balance between total decentralization/deregulation and a meaningful site-based budgeting and decision-making process. (LMI)