Chapter 1 of the Education Consolidation and Improvement Act provides basic grants to local school districts to provide supplemental services for disadvantaged students. Additionally, Chapter 1 authorizes smaller programs which provide services for students from migrant families, students in state facilities for the handicapped, and students in state-operated or supported institutions for the neglected or delinquent (N or D). This report, funded by the United States Department of Education and intended for federal policymakers, presents an analysis of state Chapter 1 programs for N or D students. The following topics are discussed in separate sections of the report: (1) federal and state administrative operations including responsibilities of state educational agencies; (2) facility operations including specifics of three state programs as well as a general overview; and (3) transitional programs including alternative high schools and group homes. A final section discusses findings and conclusions in the areas of quality of program information, compliance, program identity, and transitional programs. The report concludes that although the N and D program needs fine tuning, the program is generally well-executed and students enrolled in Chapter 1 classes show improvement. Appendixes list discussion topics for state directors about N or D services, and questions to be discussed during on-site visits to N or D facilities. (ABL)