For certain groups of the mentally ill, most notably individuals with serious mental disabilities, the community-based mental health system can be more of a "non-system." Unforeseen problems have plagued both the dream of deinstitutionalization and the effectiveness of community mental health centers during the last 20 years. Uncoordinated planning efforts between federal, state and local governments have contributed to the problem. Key coordination problems include uncoordinated care between the hospital and the community, treatment gaps and the need for a continuum of care, funding patterns which complicate coordination issues, and decreasing funds for services. Although states cannot remedy all the problems brought about by deinstitutionalization, they can ensure a future of coordinated care by enacting specific legislation and by incorporating elements basic to many successfully integrated community mental health programs. Federal money to the states for mental health and social services will probably continue to decrease. Unless states take definitive action to transfer funds and authority to the local governments already responsible for caring for the vast majority of the seriously mentally ill, states will be forced to spend more on their general mental health budgets supporting state hospitals. State legislatures can help build a better future for the mentally ill by learning the lessons of successful community based programs already exisitng within their own borders, as well as those from other states. (Specific program and legislative responses of the states are described.) (ABL)