The report documents the first stage of an 18-month study to determine the effectiveness of existing California legislation for identification of 3- to 5-year old children with special needs. Local service sites (N=112) responded to a questionnaire which addressed implementation of eligibility criteria at local sites, improvement of the implementation of eligibility criteria, and participant demographic data. Sixteen findings and related recommendations are presented. Recommendations include: provision of training activities to assist in the appropriate identification of preschool children; development of written guidelines specific to the identification of learning-disabled preschool pupils; use of the clinical observation/interview and judgment as well as written guidelines in determining eligibility; review of instruments and procedures used in assessment to ensure their appropriateness; avoidance of over-ethnic representation in the identification process; increased efforts to understand the values and cultures of minority groups; ongoing training to help parents reinforce classroom learning; development and implementation of a student tracking system; and retention of funding for services within special education though such services should be regarded as a regular education alternative. Major chapters cover related research, the study methodology, implementation of eligibility criteria, related findings, and the pilot study. Includes 12 references. (DB)