To obtain information concerning interagency agreements which use the resources of various state agencies to serve handicapped children, state agency officials in Connecticut and Maryland responsible for establishing and implementing such agreements were interviewed by Government Accounting Office officials, and pertinent documents were reviewed. In Connecticut, information was obtained on agreements: (1) to obtain third-party reimbursement to local school districts for school-based health services to handicapped students; and (2) to allow the state Departments of Children and Youth Services and of Education to share care and education costs of handicapped children in residential care. In Maryland, information was obtained regarding an executive order designed to encourage interagency cooperation through use of coordinating councils at the state and local levels which review recommendations for residential placements. This document includes state views about factors essential to establishing and implementing such interagency agreements (sufficient authority needed, agency official commitment, planning and lead time, commitment of resources). Legislative language designed to clarify financial responsibility for required services, encourage the use of interagency agreements, and eliminate obstacles to the use of such agreements requested by the subcommittee is presented. Advance comments from the United States Department of Education and Department of Health and Human Services regarding this report are appended. (CB)