Recent interactions between the state government (and to a lesser extent the federal government) and public higher education in Wisconsin are examined, and some of the major issues and actions from 1965 to the present are reviewed in order to identify imbalances that could jeopardize a"health tension" between the two sectors. Some of the elements of the tension that remain unresolved at the end of the 1970's are: state appropriations and public expectations, government intervention and scrutiny, federal attitudes toward higher education as reflected in student aid policy and programs, productivity in the face of declining resources, the role of collective bargaining, reappropriation of federal funds (applying state priorities to federal appropriations), and enrollment declines. Some positive changes have occurred that could help to restore a more agreeable balance in the higher education-state relationship in Wisconsin. First, public universities seem to be more united than in the last two decades. Second, the growth of federal student aid funds has stimulated a common interest in student aid in the private and public sectors. Third, it seems unlikely that conditions like those in the early 1970's that put higher education institutions in the midst of political controversy will occur again. It is concluded that the way academics perceive their roles may be the most important determinant of higher education in the future, and the perceptions that emerge will have important implications for relationships with government. Appended are data on: (1) University of Wisconsin (UW) system tuition charges from 1960 to 1978; (2) 1975-76 state public and private school enrollments by grade (grades 4-12); and (3) sources of funds for the UW system between 1968-69 and 1978-79. (MSE)