Contemporary educational leaders function in complex local contexts. They must cope not only with daily challenges within schools but also with problems originating beyond schools, like staffing shortages, problematic school boards, and budgetary constraints. There are some emerging patterns and features of these complex contexts that educational leaders should recognize. Educational leaders face a political terrain marked by contests at all levels over resources and over the direction of public education.The vitality of the national economy has been linked to the educational system, shifting political focus on public education from issues of equity to issues of student achievement. States have increasingly centralized educational policymaking in order to augment governmental influence on curriculum, instruction, and assessment. With the rise of global economic and educational comparisons, most states have emphasized standards, accountability, and improvement on standardized assessments. Paradoxically, some educational reforms have decentralized public education by increasing site-based fiscal management.School leaders in this new environment must both respond to state demands and also assume more budget-management authority within their buildings. Meanwhile, other decentralizing measures have given more educational authority to parents by promoting nontraditional publicly funded methods of educational delivery, such as charter schools and vouchers. Political pressures such as these have significantly changed the daily activities of local educational leaders, particularly by involving them intensively in implementing standards and assessments. Leaders at all levels must be aware of current trends in national and state educational policy and must decide when and how they should respond to reforms.The many connections between education and economics have posed new challenges for educational leaders. As both an economic user and provider, education takes financial resources from the local community at the same time as it provides human resources in the form of students prepared for productive careers. Just as the quality of a school district depends on the district’s wealth, that wealth depends on the quality of the public schools. There is a direct relationship between educational investment and individual earnings. Specifically, it has been found that education at the elementary level provides the greatest rate of return in terms of the ratio of individual earnings to cost of education. This finding argues for greater investment in early education. Understanding these connections, educational leaders must determine which educational services will ensure a positive return on investment for both taxpayers and graduates. Where local economies do not support knowledge-based work, educational investment may indeed generate a negative return. Leaders must endeavor to support education for knowledge-based jobs while encouraging communities to be attractive to industries offering such work. Educational leaders must be aware of the nature of their local economies and of changes in local, national, and global markets. To link schools effectively to local economies, leaders should develop strong relationships with community resource providers, establish partnerships with businesses and universities, and actively participate in policymaking that affects education, remembering the complex interdependence between education and public wealth.Two important shifts in the nation’s financial terrain in the past 19 years have worked to move the accountability of school leaders from school boards to state governments. First, the growth in state and federal funding for public education constrains leaders to meet governmental conditions for both spending and accountability. Second, state aid has been increasingly linked to equalizing the “adequacy” of spending across districts, which has influenced leaders to use funds for producing better outcomes and for educating students with greater needs, including low-income and disabled children. Complicating these shifts are the widely varying financial situations among jurisdictions. These financial differences have made significant disparities in spending between districts in urban areas and districts in rural areas common. In this dynamic financial context, educational leaders must strive to increase resources available for their schools, accommodate state accountability systems, and seek community support, even as they strive to increase effective use of resources by reducing class size, prepare low-achieving children in preschool programs, and invest in teachers’ professional growth.Recently, two important accountability issues have received considerable attention. The first has to do with market accountability. Since markets hold service providers accountable, if the market for education choices like charter schools and vouchers grows, leaders may be pressured to spend more time marketing their schools. The second issue has to do with political accountability. State accountability measures force leaders to meet state standards or face public scrutiny and possible penalties. The type of pressure varies among states according to the content, cognitive challenges, and rewards and punishments included in accountability measures. School leaders can respond to accountability pressures originating in state policies by emphasizing test scores, or, preferably, by focusing on generally improving effectiveness teaching and learning. The external measures resulting from political accountability trends can focus a school staff’s efforts, but leaders must mobilize resources to improve instruction for all students while meeting state requirements. And they must meet those demands even as the measures, incentives, and definitions of appropriate learning undergo substantial change.Public education is expanding in terms of both student numbers and diversity. An increasingly contentious political environment has accompanied the growth in diversity. Immigration is also shaping the demographic picture. For example, many immigrant children need English-language training, and providing that training can strain school systems. Economic changes are also affecting schools, as the number of children who are living in poverty has grown and poverty has become more concentrated in the nation’s cities.The shift to a knowledge-based economy and demographic changes accompanying the shift challenge the schools that are attempting to serve area economies. Given such demographic challenges, school leaders must create or expand specialized programs and build capacity to serve students with diverse backgrounds and needs. Leaders must also increase supplemental programs for children in poverty and garner public support for such measures from an aging population. Educational leaders must cope with two chief issues in this area: First, they must overcome labor shortages; second, they must maintain a qualified and diverse professional staff. Shortages of qualified teachers and principals will probably grow in the next decade. Rising needs in specialty areas like special, bilingual, and science education exacerbate shortages. Causes of projected shortages include population growth, retirements, career changes,and local turnover. Turnover generally translates into a reduction of instructional quality resulting from loss of experienced staff, especially in cities, where qualified teachers seek better compensation and working conditions elsewhere. In order to address shortages, some jurisdictions have intensified recruiting and retention efforts, offering teachers emergency certification and incentives while recruiting administrators from within teacher ranks and eliminating licensure hurdles. In these efforts, leaders should bear in mind that new staff must be highly qualified. It is critical to avoid creating bifurcated staffs where some are highly qualified while others never acquire appropriate credentials. Leaders must also increase the racial and ethnic diversity of qualified teachers and administrators. An overwhelmingly White teacher and principal corps serves a student population that is about 31% minority (much greater in some areas). More staff diversity could lead to greater understanding of different ways of thinking and acting among both staff and students. This survey of the current context of educational leadership reveals three dominant features. First, the national shift toward work that requires students to have more education has generated demands for greater educational productivity. Second, this shift has caused states to play a much larger role in the funding and regulation of public education. Third, states’ regulatory role has expanded to include accountability measures to ensure instructional compliance and competence. Educational leaders must take heed of these features if they hope to successfully navigate the current educational terrain.