The National Education Goals Panel (NEGP) tracks and reports annually on 33 indicators linked to the 8 National Education Goals. The NEGP's 1997 report showed positive gains on the greatest number of indicators for North Carolina and Texas. These gains included significant gains on the 1996 National Assessment of Educational Progress (NAEP) in mathematics. The NEGP commissioned this study to see if the improvements were really significant and to try to identify the factors that could or could not account for the educational improvement in these two states. The analysis confirms that the gains in academic achievement in both states are both significant and sustained. North Carolina and Texas posted the largest gains on the NAEP administered between 1990 and 1997, and these results were mirrored in state assessments administered in the same period. There is also evidence that the scores of disadvantaged students improved more rapidly than those of advantaged students. Several factors commonly associated with student achievement, including real per-pupil spending, teacher/pupil ratios, teachers with advanced degrees, and experience levels of teachers, do not appear to explain the test score gains. Texas and North Carolina rank at or below the national averages on these characteristics, and none of them changed during the study period in ways that would explain the gains. The study concludes that the most plausible explanation for the score gains is found in the policy environment established in each state. Both states pursued similar paths to improvement, and each succeeded in changing the organizational environment and incentive structure for educators in ways that led to improvement. The keys to this change include: (1) creating an aligned system of standards, curriculum, and assessments; (2) holding schools accountable for improvement by all students; and (3) support from businesses in developing, implementing, and sustaining these changes over time. (Contains 16 figures, 4 tables, and 18 references.) (Author/SLD)