As part of a series of reports designed to support the implementation of Proposition 10: The California Children and Families Act and to provide comprehensive and authoritative information on critical issues concerning young children and families in California, this report examines the current situation for children who have been maltreated by their parents and who are served by the child welfare system. The report provides background information on the current design of the state's child welfare system and data on the numbers of children affected by maltreatment. The report also describes how young children are disproportionately affected by child maltreatment and how their unique vulnerabilities are exposed and often exacerbated by the system. Some of the problems currently affecting child welfare are described, and a series of innovative program approaches are offered that suggest alternative service designs that are now being implemented for young children. The report asserts that Proposition 10 commissioners have the opportunity to offer both financial assistance as well as a fresh perspective on the developmental needs of young children and the factors associated with healthy development, and thus can have a positive impact on truly disadvantaged children. Finally, the report argues that by focusing on preventive services for vulnerable families, catalyzing coordination among existing service systems, and targeting service delivery to the critical transition points in children's lives, the developmental trajectory of many youngsters may be improved considerably. The report's two appendices list useful organizations and experts and identify child welfare funding sources in California. (Contains 111 references.) (KB)