The crucial role of the states in postsecondary education and the changing conditions in higher education are addressed. It is noted that the states constitute the largest single source of funding for higher education and have the largest investment in it, and historically and constitutionally are primarily responsible for education. Important trends are declining college enrollments and the need to develop new student clienteles, including older citizens, who may require major changes in curriculum, services, and modes of instruction. There is also public concern with what appears to be overproduction of highly educated manpower (undergraduate and graduate levels). Inflation and decreased funding for education are major concerns, along with the demand for greater accountability by the general public and state government. A more recent development of significance has been the creation of independent legislative or executive auditing agencies concerned with both fiscal audit and performance audit (linking expenditures to outcome or results). Another factor has been the tendency on the state level toward increased centralization not only in planning and coordination but in governance and structure of public higher education. Concern is expressed that the states are spending considerable amounts on postsecondary vocational education, sometimes in direct duplication of occupational programs in community colleges and even regional colleges. It is suggested that there is need for directness in communication between higher education and state government, including legislators, the chief executive, and their staff, along with a need for effective statewide and institutional planning and attention to outcomes. (SW)