The international trend of shifting educational management responsibilities to the schools themselves has exerted a powerful influence on education over the past 20 years. Many reasons have been given for the emergence of the self-managing school, and an analysis of the most important reasons are examined here. The paper focuses on education in Australia and on the effects of recession. It argues that politicians have used fiscal crises to divert funds from public education to increase funding for nongovernment schools. The text explores the purpose of resource allocation; examines the research surrounding the education-production function model; details the impact of the class-size debate; discusses the role of education funding in Australia with the idea of determining if such funding is driven by efficiency or by ideology; and provides two case studies, in Victoria, Australia, and in Auckland, New Zealand, to illustrate parts of the argument. It is suggested that there has been a deliberate attempt to ensure that the most advantaged students in Australia will stay that way, as illustrated by the fact that when retention rates for government school approached those of nongovernment schools, government funding decreased. (Contains 43 references and 9 tables.) (RJM)