Factors affecting the state role in financing educational programs for special student populations are examined along with potential state policy considerations related to the provision of special services. An outline of the major problems facing state policy makers, such as federal budget cuts, teacher shortages, and the needs of gifted and talented students, is followed by a list of suggestions for low-cost expansion of services. These suggestions include provision of small planning grants for local school districts, state assistance in identifying disadvantaged students, a school-based approach to funding special needs programs, relaxation of targeting requirements, and tying the distribution of funds to program performance standards. The paper concludes with a list of recommended reading. (LP)