This report presents case studies from seven states showing how state governments are: (1) responding to demands for more efficient and effective delivery of children's services; (2) taking on additional responsibilities formerly handled at the federal level; and (3) passing on added responsibilities to the local level (school districts, local government, dedicated collaboratives, and neighborhood partnerships). The first section of the report discusses progress among the states in financing reform, points to many differences in approach, and notes recurring and cross-cutting themes in each state. This section concludes with observations and a list of critical, ongoing challenges for states as they continue reform efforts in the delivery of children's services. The responses of policymakers and selected education and service initiatives in California, Kentucky, Michigan, North Carolina, Oregon, Vermont, and Wisconsin are highlighted. State reports are based on interviews with major observers (key state leaders, officials and advocates) and reviews of relevant written materials. For each state there is a report, beginning with a summary, followed by a formatted illustration page, "At a Glance," showing government structure, budget process, fiscal capacity, demographics, revenues, expenditures, and resources for education and other children's services. Each state section also includes an introduction to the state's efforts to reform the financing and delivery of children's services, descriptions of specific programs, discussions of salient issues, and overall observations. (ET)