The third of five volumes of a study of instructional programs for handicapped children and youth in separate day care and residential facilities, this document presents the results of an analysis of State education agency (SEA) procedures and the impact of these procedures on special education services and practices within the targeted facilities. The analysis draws upon a variety of sources, including case studies of eight states (California, Connecticut, Florida, Illinois, Louisiana, New Jersey, Ohio and South Carolina), a survey of 50 SEA special education divisions, a survey of 1,941 separate facilities, and case studies of 24 separate facilities from the case study states. Part 1 of the report focuses on the economic and educational context and the structure of state special education systems. Part 2 deals with SEA procedures for special education funding, standards, monitoring, technical assistance, in-service training, program development, and dissemination activities. Part 3 discusses factors affecting educational practice at separate facilities, specifically: changes in student population and mission; factors affecting programs, such as individualized education and transition plans, changes in life skills and vocational education, increased use of treatment and behavioral goals in educational programming, and program evaluation; factors affecting facility staffing, such as staff development and staff evaluation; and factors affecting student integration and parental involvement. Three technical appendices review the study methodology, and 15 references are included. (JDD)