The first part of this report on school dropouts summarizes the testimony at a hearing on dropouts given by: (1) Jacqueline P. Danzberger, The Institute for Educational Leadership; (2) Anthony Earl, former governor of Wisconsin; (3) Janice Earle, National Alliance of State Boards of Education; (4) Gloria Frazier, National Foundation for the Improvement of Education; (5) Jeff Johnson, 70001 Training and Employment Institute; (6) Emily C. Martin, Office of Juvenile Justice and Delinquency Prevention, United States Department of Justice; and (7) Pierce A. Quinlin, National Alliance of Business. Hearing participants are listed with their addresses. The second part is a report on financing state dropout programs. The scope of the dropout problem, resource requirements, cost of program services, program evaluation, specific state initiatives, and strategies for financing dropout prevention programs are discussed. The third part highlights specific state policies in the areas of support of local initiatives, alternatives to traditional student discipline programs, screening, preschool programs, interagency cooperation, compiling information on existing programs, public awareness programs, and technical assistance. (ABL)