Summary: P.L. 89-313, title I program for the handicapped makes grants available to State agencies responsible for educating handicapped children. The specific purpose for which these funds are to be used has never been entirely clear. Congress needs to clarify whether the program should finance only those activities which are supplemental to a basic, state-financed educational activity, or should help finance the basic educational program itself. The degree to which P.L. 89-313 funds may be targeted to or from certain groups of handicapped children is not entirely clear. Congress should clarify whether targeting is acceptable and, if it is, the Department of Health, Education, and Welfare (HEW) should implement regulations which clearly state those conditions under which targeting is or is not permissible. If the purpose of the program is primarily to support activities which supplement a state-defined and funded education program, some changes in program administration are needed. Congress should consider legislatively transferring the program to the Education of the Handicapped Act. HEW leadership is needed to develop methods for the interchange of knowledge between state schools and institutions for handicapped children.