This report provides background information and questions for discussion of special education policies by Ohio state legislators. Background information notes that approximately 10 percent of children, both nationally and in Ohio, receive special education services at an estimated cost in Ohio of $1.2 billion. Issues of compliance with federal law and funding equity between poorer and wealthier districts are raised. Sources of funds are specified, along with distribution of funds and alternatives to the present distribution methods. Also addressed is the issue of inclusion and positive and negative implications of inclusion's effect on children's exposure to diversity, their preparation for the future, their academic experiences, and social and behavior changes. The report also considers the effect of inclusion on schools and districts and supports a continuum of possible placements rather than a blanket policy of inclusion. Some preliminary data on the longterm outcomes for students in special education are also reported. Five specific policy questions are raised, addressing: (1) the long-term goals for special education; (2) the most effective allocation of limited resources; (3) implications of limiting educational services for children with disabilities; (4) restructuring of the regular/special education system; and (5) evaluating educational services for effectiveness. Appendices include additional detail on due process procedures, school district expenditures by size and income, various funding distribution methods, and the status of inclusion. (Contains 50 references.) (DB)