In Part H of Public Law 99-457, the Federal Government agrees to provide modest financial resources to aid the states in planning and developing comprehensive, multidisciplinary, coordinated services for young children with handicaps and their families, and presents mandates for reforms in the service delivery system. This paper identifies the major state policy issues presented by the legislation and some of the options for addressing these issues. General policy issues that are raised by the broad scope of the legislation include: state policy-making responsibilities; coping with the diversity of clients, professionals, agencies, and personnel; state readiness; and long-term financial support. Six specific policy areas dealing with various aspects of the law are also discussed: definition and eligibility criteria, meeting personnel requirements, assuring involvement of families, obtaining finances, coordinating services, and designing data systems. For each specific policy area, the issues involved are discussed and possible options are presented for solution of the issues. (JDD)