The purpose of this study was to develop an appropriate methodology and use it to estimate the costs of providing appropriate special education programs and services for all school-aged handicapped children in the U.S. in 1980-81. A resource-cost model approach was selected, based on a mathematical formulation of the relationships among students, programs, resources, and decision rules involved in the special education process. Data from 26 states concerning current and expected programming practices and characteristics of the handicapped population formed the data base to operate the resource-cost model. Results showed the most likely estimate of special education costs for all school-aged handicapped children in 1980-81 to be $7.926 billion. Extremes of the high ($20 billion) and low ($4 billion) estimates indicated the critical importance of program decisions. The paper concludes with a discussion of policy implications and uses of both the resource-cost methodology and the cost estimates, together with future research questions suggested by the study. (Author/LD)