Many mentally ill children, especially those who are seriously disturbed, are not receiving the mental health care they need. Although the federal government offers financing to the states for child and adolescent mental health programming, the primary responsibility for financing mental health services has been assumed by state governments. At the local level reimbursement systems and the economic climate have served as fiscal disincentives to continued development of community-based programs for this group. The reality of mental health care for children and adolescents has historically been one of disorganization, lack of coordination, and an overemphasis on unnecessarily restrictive treatment programs. Barriers to delivering appropriate services to children include definitional ambiguity; service fragmentation; economic disincentives; crisis orientation; and lack of advocacy. The continuum care mode for children should include the components of prevention, non-residential, and residential services. Although children's mental health services have improved dramatically, these systems continue to have major gaps and barriers. State legislatures and other governmental bodies, foundations and other private sector institutions, and mental health systems are attempting to produce positive changes. Despite this progress, much remains to be done. Policymakers should focus on developing a continuum of care, coordinating and integrating the delivery system, and involving families in the treatment process. (Specific program and legislative responses of the states are described.) (ABL)