Pennsylvania State University's early response to declining resources and its current planning and budget process are described. Attention is also directed to the fiscal outcomes of the process over the past 5 years and several of the strategies devised to promote qualitative concerns and respond to variable growth-decline situations. From 1971 to 1976 budget gaps were closed by imposing across-the-board position freezes followed by collapsing vacant positions or reducing their level of funding. Support expenditures also were reduced substantially in such areas as travel, telephones, equipment, and wages. It was determined that future budget reductions must result from careful long-range planning, focusing on the central needs of the university's academic and administrative units. The planning and budget process that was initiated in 1977 used selective reductions and reallocations and evolved into a rolling 5-year process. The key elements of the process include financial projections, recycling assessments, planning questions and data support, responses by individual units, planning and budget hearings, advisory committee deliberations and recommendations to senior officers, and operating budget development. For the program of internal recycling and reallocation (1971-1976), a total of $11.1 million was pulled back and reallocated primarily for increased costs of operation. Since the rolling 5-year planning and budget process was initiated in 1977, an additional $14.6 million has been reallocated through 1981. Recommendations and the following funding mechanisms to support quality are considered: the Provost's Revolving Fund, matching concepts for general funds and extramural funds, and private funds. (SW)