Federal education policy will soon undergo a major revision, with significant consequences for the state's own policy and practices. This report seeks to help federal and state policymakers consider this restructuring and one of its core questions: How should schools and school districts be held accountable for the academic progress of their students? At present, California schools and districts are held accountable based on rules set forth in the federal No Child Left Behind (NCLB) Act of 2002. NCLB requires schools and districts to show that increasing shares of their students are attaining specified levels of proficiency in English and math. These levels must be attained by NCLB-set deadlines until the final 2014 deadline, when all students in the state are to be proficient. Schools and districts can face sanctions if they fail to meet proficiency deadlines--up to and including being closed down and their students dispersed to other schools. However, it is now generally acknowledged in the education community that few California schools will actually meet the 2014 NCLB goal of 100 percent proficiency. Theoretically, that means a majority of California schools could be facing federal sanctions. In light of these realities and of the upcoming policy restructuring, policymakers may want to consider an alternative method for measuring student proficiency. A value-added model makes it possible to identify schools where students' test scores are higher or lower, on average, than one would expect given their prior achievement histories and other background characteristics. A value-added model may provide a more accurate measure of how schools are actually doing. Here's why: The current accountability system may be judging schools partly on factors that schools cannot control. The authors' analysis of schools that are least likely to meet NCLB's 2014 goals finds that they tend to have more economically disadvantaged students and English learners. Conversely, those that consistently meet their yearly NCLB goals have fewer such students, as well as smaller overall enrollments. This finding suggests that the attainment of proficiency levels is not purely a measure of school quality, but also a measure of the type of students a school happens to serve, along with other salient school characteristics such as size. A value-added model, which would measure the school's contribution to student learning, would diminish the impact the composition of a particular student body has on a school's accountability rating. Using a value-added approach would therefore be a more accurate and fair means of assessing school effectiveness. (Contains 3 figures, 5 tables and 10 footnotes.) [For the companion report, "Improving School Accountability in California. Technical Appendices," see ED518180.]