OBJECTIVE: This study evaluated the impact of state legislation in Indiana mandating establishment of local coordinating committees to prevent inappropriate placement of children and youth with serious emotional disturbance out of the home and to facilitate the development of communitybased initiatives. METHODS: In the first stage of the study, a survey was sent to the directors of mental health, welfare, education, and probation agencies of each county to estimate the extent that the structure and processes mandated by law were in place. In the second stage, structured interviews were conducted with the directors of key agencies in seven representative counties. RESULTS: Stage 1 produced 310 completed surveys from all 92 counties; 73 counties had functioning committees. Improved coordination among providers was the most frequently cited reason for the committee's success; half of the respondents felt that the committee resulted in better services. More than half reported that too few service options were available. Other problems cited were rigid funding opportunities that limited options and lack of staff time to attend and prepare for meetings. Interviewees in the second stage noted that the committee too often formalized already-made decisions, that consideration of individual cases came too late in the process, and that in many cases less restrictive options had already been tried unsuccessfully. They also noted that the committee process had not achieved its major objective of pooling resources to address the needs of particular children. CONCLUSIONS: Adequate funding and a fiscal strategy to support coordination and staffing of local coordinating committees are critical to their successful implementation.