The report examines the progress made in implementing the requirements mandated by the Education of the Handicapped Act, as amended by PL 98-199, with a specific focus on activities during school year 1984-85. Data are presented regarding four major topics: (1) students receiving a free appropriate public education (factors associated with serving handicapped children who have complex needs); (2) the implementation of key provisions of the act assuring the rights of handicapped children (69% of all handicapped children reported by the states received most of their educational program in regular classes, more special education teachers and related services personnel are reported to be needed in every category); (3) assisting states and local agencies in educating all handicapped children (financial assistance figures are given for the EHA-B State Grant Program, and Special Education Programs' state program review procedures are described), and (4) efforts to assess and assure the effectiveness of programs educating handicapped children (a majority of states are in initial stages of implementing program evaluation practices). Extensive appendixes include a description of early education state grants and data tables for child count, personnel, and least restrictive environment. (CL)