This legislatively mandated study is an outgrowth of California's new special education finance law that changed the basis of special education funding to a census system based on the total number of students enrolled in a school district. The study interviewed program directors, school administrators, and policy advisors on whether the state should alter the funding provisions for nonpublic school (NPS)/licensed children's institution (LCI) students. Results of the study indicate: (1) NPSs and nonpublic agency placements were considered important components of special education services, however, concerns were raised because of the high number of students using NPS and NPA services; (2) a general concern existed about the lack of state standards to guide decisions on which programs are appropriate for children with special education needs; (3) there were concerns that placing students in an NPS may be increasingly viewed as the path of least resistance; (4) there is too little emphasis on transitioning students from NPS back to public school settings; and (5) respondents believed the due process system is not working well and mediators and hearing officers lack qualifications. Policy recommendations are discussed. Appendices include data charts. (Contains 12 references.) (CR)