The report of the House Committee on Education and Labor recommends passage of the Education of the Handicapped Act Amendments of 1986, H.R. 5520. Contents include a discussion of the background and need for the legislation followed by an explanation of the proposed amendments, a section-by-section analysis, and the complete text. First, the bill amends the Education of the Handicapped Act (EHA) by establishing a new federal discretionary program to assist states in developing and implementing a comprehensive, coordinated, interdisciplinary program of early intervention services for handicapped infants and toddlers and their families. Second, the bill amends the preschool incentive provision and other sections in Part B of EHA to strengthen the incentive for states to serve all handicapped children ages 3 to 5, inclusive. Finally, the bill amends Part B evaluations and amends and extends the authority for the discretionary programs under Parts C through G. Among the amendments described are the individualized family service plan, State Interagency Coordinating Council, and the relationship among public agencies for providing or paying for services detailed in a child's individualized education program. Secondary education and transitional services for handicapped youth, as well as grants for personnel training, are also addressed. (JW)