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In recent years, numerous state governments have introduced and enacted policy related to third grade reading proficiency and retention. Research provides mixed results as to whether retaining students based on the results of a standardized test will benefit the student. This study utilizes principal-agent theory and street-level bureaucracy theory to better understand the ways in which school districts respond to state-mandated test-based third grade retention policy. While both policymakers and practitioners may have the same end goal – to increase reading proficiency – evidence from regression analyses suggests that school districts use their informational advantage to pursue means other than retention to achieve this end.