Despite the adoption of special state funding formulas that address the needs of small schools, Utah educators have continued to observe an imbalance in academic performance between rural and urban students. This report examines: academic achievement in Utah's small schools; factors related to school size that may influence academic achievement; and the ability of small schools to implement new State Board of Education policies on instructional programs and graduation requirements. Information was drawn from: the 1984 Utah Statewide Educational Assessment Program; American College Testing Program (ACT) results; a 1984 survey of about 15,000 Utah high school seniors; and a survey of principals in the state's 25 smallest high schools. Compared to students from larger schools, students in small rural high schools: (1) performed at lower levels on basic skills, particularly reading comprehension and math computation; (2) scored lower in noncognitive areas such as academic self-concept, peer relations, and career awareness; (3) had significantly lower ACT scores; (4) had lower socioeconomic status; (5) took fewer classes in intermediate and advanced mathematics; (6) had higher levels of participation in extra-curricular activities; and (7) reported greater enjoyment of school. Most small school teachers carried an excessive daily preparation load, and many taught classes they were not academically prepared to teach. With regard to new state requirements, most small schools will be able to provide sufficient course offerings to meet minimum graduation requirements, but will be limited in their offerings of advanced college preparatory courses and specialized vocational training programs. (SV)