This document contains witnesses' testimonies and prepared statements from the Congressional hearing called to examine the living conditions of children in state care. Parents, youth workers, legal advocates, program administrators and state officials discuss the cost effectiveness of community-based services and the effectiveness of various preventive approaches. Ways in which communities have allowed children to thrive in permanent placements and receive services appropriate to their needs are examined. The lack of monitoring and accountability of institutions that house children is considered. Witnesses discuss the conditions of children in state care in the District of Columbia, Maryland, California, Kentucky, Mississippi, and North Carolina. Opening statements are included from Representatives George Miller and Dan Coats. Witnesses providing testimony include: (1) William Aldrich, California Office of the Auditor General; (2) Lenore Behar, Child Mental Health Services, North Carolina Division of Mental Health, Mental Retardation, and Substance Abuse Services; (3) Robert Burton, VisionQuest; (4) Judy Guttridge, mother; (5) Patricia Hanges, volunteer youth advocate, Francis House, Baltimore, Maryland; (6) Nellie Hutchison, director, Mississippi Governor's Commission for Children and Youth; (7) April Kerr, Council for Retarded Citizens, Kentucky; (8) Jeffrey Rosenberg, National Committee for Adoption, Washington, DC; (9) Peter Schneider, Restitution, Education, Special Training, and Technical Assistance Program, Bethesda, Maryland; (10) Diane Shust, Juvenile Services Program, Public Defender Service, Washington, DC; (11) Mark Soler, Youth Law Center, San Francisco, California; (12) Diane Weinroth, Child Advocacy and Protection Committee, Bar Association of the District of Columbia; and (13) Michael Woodruff, Center for Law and Religious Freedom, Christian Legal Society, Virginia. Prepared statements, letters, and supplemental materials are included. (NB)