This report examines the cost effectiveness of the Marchus School's 599/1261 Project, one of two programs funded by the State of California, that established an inclusive education program for 17 students with serious emotional disturbances at risk for nonpublic school placements. The project teaches academic, social, and conflict resolution skills by using a social cognitive approach that fosters healthy emotional development and academic achievement. The active support and participation of each student's family is also encouraged. "Wrap around services" provided by mental health and other agencies support the classroom staff and include services such as a one-to-one assistant, a mobile therapist who provides therapy in the home and school, and a behavioral intervention specialist. As a result of the project, from August 1994 to August 1996 more than $333,000 was saved due to the avoidance of more restrictive and costly educational settings. Four of the students were moved from residential/group home settings to more normal living situations with family members, an additional savings of $70,000. The total savings as a result of the project was over $700,000 in two years. The report includes case studies for three of the students and recommendations for successful replication of the model. (CR)