Facing severe budget reductions in 1991 despite institutional restructuring in response to budget cuts in the mid-80s, the Chancellor's Ad Hoc Budget Planning Group at the University of Alaska Fairbanks (UAF) proposes a process for fiscal change while aiming to retain institutional excellence. A first section states the current problem, reviews planning and budget theory, and looks at how other institutions have responded to similar problems. "Section II: Assessing UAF's Budget Responses During Restructuring" examines the restructuring of the University of Alaska System in the mid-80s assessing results and UAF's budget responses. Included is a detailed historical overview of the process, and a description of the budget reduction strategies for fiscal years '86, '87, '88. Section Three lists factors which affect UAF's management flexibility and revenue diversification. A final section proposes steps to be taken: (1) institution-wide actions and review of programs and support services; (2) cuts and reallocation on support services; (3) retrenchment and reallocation in academic programs. Each of these steps is described with detailed suggestions on implementation. Included are four appendices: UAF fiscal year budget reductions for 1986, 1987, and 1988, and a list of cost cutting suggestions developed by a 1986 task force. A bibliography included about 45 references. (JB)