This report reviews the method and level of funding for special education facility needs in California and recommends modifications. It begins by summarizing special education programs, describes classroom needs, and finally discusses past and present facilities funding methods. A discussion of various options for funding special education facilities follows, along with a recommendation for funding new construction and modernization projects. The review found that local authorities should be given the responsibility to provide the facilities required to educate all of their pupils while minimizing state and local administrative costs; that the grant levels adequately address special education facility needs except for special day classes; that classification of special day class pupils as "severe" and "nonsevere" does not accurately reflect the facility needs of the population; and that a reasonable methodology is needed to provide for new construction and modernization to Medical Therapy Units. Based on the review, the legislature is urged to: (1) establish a uniform facility grant for all pupils; (2) establish a separate facility grant for county offices of education; and (3) require county offices of education to provide local matching funds except in financial hardship cases and establish a revolving loan fund to assist county offices in providing local matching funds. (CR)