Shortly following its election in 1992, the Victorian Liberal Government announced its intention to overhaul Government departments and the bureaucratic structure of the public service, in an effort to 'kick start' the flagging Victorian economy. Government departments were amalgamated and restructured in accordance with the Managerialist and contractual philosophies of the Government. Victorian kindergartens fell under the auspice of the Department of Health and Community Services. This Department was committed to the Government's reform agenda and introduced policies and procedures to support this. The kindergarten sector provides an illustrative case study of the reform process. Initiatives were introduced to encourage greater service flexibility and lower departmental expenditure through a per capita funding arrangement and voluntary, community centre management. The result has been a combination of intended and unintended consequences, which have brought the Victorian kindergarten sector to the brink of collapse.