This report covers the first phase of the Illinois Children's Mental Health Project and establishes principles for helping children with emotional disturbances and their families based upon their actual needs. Section I examines the problem with a discussion of identification of those children at greatest risk, the role of the mental health system, and identification of needs. Section II looks at opportunities for helping these families in the areas of: medical/health care; child care; child welfare services; community-based, family support drop-in centers; community mental health centers; Head Start and children at risk preschool programs; preschool special education; provisions of Public Law 99-457; Medicaid funding for the Early and Periodic Screening, Diagnosis, and Treatment program; and advocacy. Eleven recommendations are made, including: increase efforts to identify young children and families in trouble; increase training of child care providers; establish community-based family support and drop-in programs; provide an array of children's services by community mental health centers; involve parents in planning early childhood special education services; plan for emotional and social development in early intervention efforts; and utilize Medicaid revisions to provide coverage for a broader range of community mental health services. Includes 25 references. (DB)