Intended to help state level administrators plan for minimal competency testing programs, the guide discusses conceptual, legal, and budgeting considerations involved in competency programs for different handicapped populations. Problems and remedies are cited from a longitudinal study of the implementation of P.L. 94-142, the Education for All Handicapped Children Act. Five chapters are designed to answer the following questions (sample findings in parentheses): Who should set test standards? (difficulties encountered when local school districts set standards); Who should be included in competency test programs? (legal requirements stating that decisions be made on an individual basis); What kinds of competency test should be used with handicapped students? (modification of test administration procedures rather than development of special tests for handicapped students); When should competency tests be administered? (use as a screening test for early detection of learning problems); and What should graduation criteria be for handicapped students? (use of differential standards). (CL)