This report of the Legislative Budget Committee of the State of Washington addresses issues regarding students in the learning disabled (LD) category of special education including cost of identifying LD students, means of determining program eligibility, effectiveness of services, and student characteristics. The report is based on literature reviews and an analysis of statewide data including achievement test scores, assessment time data obtained from interviews in 9 school districts, and student files in 13 school districts. Major conclusions are: (1) the assessment process for identifying students as LD is expensive and has little diagnostic or programmatic value; (2) programs for LD and other students with mild handicaps provide little information on student outcomes or program effectiveness; and (3) many students identified as learning disabled are educationally similar to low achieving students in other programs. The major recommendation is legislation to authorize special services demonstration projects which would: provide waivers to state rules; promote non-categorical approaches through funding changes; encourage school districts to develop alternative means of identifying learning disabilities; increase the proportion of resources devoted to classroom instruction; and provide for technical assistance and staff development in local school districts. Appendices provide data tables and a summary of responses to the final report. (DB)