This report presents findings of a state-wide evaluation of special education in Minnesota with emphasis on costs and the impact of state and federal regulations. Major findings indicated that the percentage of students receiving special education services has risen from 7.4 percent to 10.9 percent over the last two decades; special education expenditures have risen about twice as fast as total education spending since 1988; and students who receive special education services cost about twice as much to educate as other students. The study also concluded that Minnesota's special education regulations are more extensive and specific than required by the federal government and that the state provides special education to a broader array of students than federally required (especially for students with emotional/behavioral disorders). The state is urged to give districts greater administrative freedom, encourage the use of alternatives to special education, and adopt a simpler funding system. Individual sections of the report detail the study's findings and recommendations concerning: (1) students and spending, (2) state and federal requirements, and (3) innovation and change. A response by the Minnesota Department of Children, Families, and Learning concludes the report. (DB)