The process of economic retrenchment and institutional decline that occurred within the City University of New York (CUNY) in 1975-1976, a time of New York City fiscal crisis, is analyzed. Attention is directed to the public policy conflict between the policies of free tuition and direct student aid; the relative roles of state, city, and federal officials, the Board of Regents, and the university constituencies; and the decision-making process through which uniform tuition was imposed. The focus is on the politics of higher education as institutions become more dependent on the state for scarce resources, and in addition to the CUNY experience, guidelines are offered for implementing policy retrenchment in the 1980s. Uniform tuition was seen by many as the highest ranking alternative to be considered; however, the Board did increase tuition and fees for graduate and nonmatriculated students, and general fees for all students. Raising academic standards was seen as masking retrenchment of open admissions under a veneer of educational quality. Restructuring through mergers and closing was another retrenchment alternative, along with payless furloughs, parity with the State University of New York, closing down CUNY, consolidating academic programs, eliminating the spring 1975 freshman class, and faculty and staff layoffs. That is, CUNY tried to avert state intervention by reducing its size, enrollments, programs, and personnel. The state's strategy included recruiting outsiders to recommend retrenchment criteria, buying off the beneficiaries of change through student aid entitlements, and withholding needed resources. The policy retrenchment process is assessed in relation to fiscal, governance, and policy implications. (SW)