WRT funding implications, in many states federal and state funding of school districts is tied to participation rates on state-wide testing. The original intent was to make sure that districts did not exclude students with disabilities in an attempt to artificially inflate average test scores and/or disenfranchise students with disabilities. The NCLB indices, and associated state DOE indicators, are the main reason that schools (that do) push so hard for participation. It not only affects funding for the school, sometimes in a very direct way (fall below a certain participation percentage, lose certain types of funding), but also autonomy, as having indicators miss benchmarks eventually leads to DOE-mandated re-organization, which often starts with indiscriminate mass firings, and includes living under a microscope for quite a while.
Again in most states, state-wide testing is not allowed to be high-stakes for individual students until one reaches the high-school exit exams/end-of-course exams. Up until that last round of testing, all state-wide testing is supposed to be a measure of the effectiveness of the school (and teachers), without consequences to the individual student. Hence, not used in placement decisions.
Some might say these are additional arguments against mandated state-wide testing...at least one can understand better how administrations become so anxious about opting out/participation.
