This paper explores the relationship between ethnic diversity and local school funding in Kenyan primary schools. The empirical results paint a picture of pervasive local collective action problems in ethnically diverse Kenyan primary schools. Local ethnic diversity is robustly associated with lower local school funding, less parental involvement in school functions, and fewer desks, latrines, and classrooms per pupil in ninety-seven rural Kenyan primary schools. However, local ethnic diversity is not related to average test score performance in these schools. The theory examines the school choice and school funding process when student mobility between schools is limited by land market imperfections, and some aspects of educational quality - such as headmaster competence - differs markedly across schools. The implication for human capital accumulation, economic growth, and local collective action are discussed, especially for Africa.