Declares an intent to substantially improve the delivery of children's mental health services in Washington state through the development and implementation of a children's mental health system that: (1) Values early identification, intervention, and prevention;

(2) Coordinates existing categorical children's mental health programs and funding, through efforts that include elimination of duplicative care plans and case management;

(3) Treats each child in the context of his or her family, and provides services and supports needed to maintain a child with his or her family and community;

(4) Integrates families into treatment through choice of treatment, participation in treatment, and provision of peer support;

(5) Focuses on resiliency and recovery;

(6) Relies to a greater extent on evidence-based and promising practices;

(7) Is sensitive to the unique cultural circumstances of children of color and children in families whose primary language is not English;

(8) To the greatest extent possible, blends categorical funding to offer more service and support options to each child; and

(9) Integrates educational support services that address students' diverse learning styles.

Declares that it is the goal of the legislature that, by 2012, the children's mental health system in Washington state include the following elements: (1) A continuum of services from early identification, intervention, and prevention through crisis intervention, including peer support and parent mentoring services;

(2) Equity in access to services for similarly situated children, including children with co-occurring disorders;

(3) Developmentally appropriate, high quality, and culturally responsive services available statewide;

(4) Treatment of each child in the context of his or her family and other persons that are a source of support and stability in his or her life;

(5) A sufficient supply of qualified and culturally diverse children's mental health providers;

(6) Use of developmentally appropriate evidence-based and promising practices; and

(7) Integrated and flexible services to meet the needs of children who, due to mental illness or emotional or behavioral disturbance, are at risk of out-of-home placement or involved with multiple child-serving systems.

Provides that educational service district boards may respond to a request for proposal for operation of a wraparound model site under this act and, if selected, may contract for the provision of services to coordinate care and facilitate the delivery of services and other supports under a wraparound model.

Provides that the evidence-based practice institute established in this act shall evaluate the wraparound model sites, measuring outcomes for children served. Outcomes measured shall include, but are not limited to: Decreased out-of-home placement, including residential, group, and foster care, and increased stability of such placements, school attendance, school performance, recidivism, emergency room utilization, involvement with the juvenile justice system, decreased use of psychotropic medication, and decreased hospitalization.

Requires the evidence-based practice institute to provide a report and recommendations to the appropriate committees of the legislature by December 1, 2010.

Provides that, to the extent that funds are specifically appropriated for this purpose the department shall revise its medicaid healthy options managed care and fee-for-service program standards under medicaid, Title XIX of the federal social security act to improve access to mental health services for children who do not meet the regional support network access to care standards. Effective July 1, 2008, the program standards shall be revised to allow outpatient therapy services to be provided by licensed mental health professionals, as defined in RCW 71.34.020, and up to twenty outpatient therapy hours per calendar year, including family therapy visits integral to a child's treatment.

Provides that the evidence-based practice institute established in this act, in consultation with the Washington state institute for public policy, shall review and summarize current law with respect to inpatient and outpatient mental health treatment for minors.

Requires the review to include current practices to determine the percentage of cases in which parents are engaged by treatment providers and the extent to which they are actively involved in the treatment of their minor children.

Requires the evidence-based practice institute to provide a report and recommendations to the appropriate legislative committees by December 1, 2008.

Repeals RCW 71.36.020 and 71.36.030.