The development of policy to respond to reduction and financial exigency in higher education was studied, based on a survey of presidents of 19 public and 35 private colleges and universities. In addition to assessing policy development, the survey was directed to efforts to increase enrollments and revenue and to reduce expenditures and criteria for the retrenchment of faculty and staff. Fifty-nine percent of the respondents indicated that informal policies were implemented or that formal policy was being developed regarding reduction of expenditures. In contrast, formal policy related to financial exigency was in effect at 63 percent of the public and at 31 percent of the private institutions. Additionally, 30 percent indicated that exigency policy was being developed. Most institutions indicated that they would increase recruitment efforts to offset enrollment declines, and other possible responses included combining programs or merging institutions, adding or deleting program offerings, and altering institutional missions or goals. Approximately 90 percent of institutions that have experienced or expect reductions in funding indicated that increased development activities was or will be a priority action, seeking grants and gifts to supplement other revenue. Other methods to increase revenue and methods to decrease expenditures are assessed, as is the impact that a reduction of personnel would be likely to have on instructional and support staff. Criteria for the retrenchment of faculty appeared to be based primarily on program needs. Seniority received a high priority among public institutions, while performance was given to private colleges. Internal policy development and external cooperation among public and private institutions are suggested to enhance institutional survival. (SW)