This paper discusses a study that examined three questions: How has overall state spending on higher education changed from year to year in relation to states' ability to fund higher education? (2) Has the growth in state spending on higher education varied significantly from the growth in total state budgets in recent years? and (3) What have been the factors contributing to the changes? The paper discusses the study in three main analytical sections. The first includes an analysis of state tax capacity and state spending on higher education per capita in fiscal years 1980 and 1990. The second section looks at data collected annually by the Fiscal Section of the National Conference of State Legislatures regarding state budget actions between 1985 (first year of the survey) and 1990. It also provides statistical comparisons of higher education spending growth with overall spending growth in the states showing the ebb and flow of higher education spending at somewhat differing rates than the ebb and flow of overall spending. The final section focuses on the experiences of two states: Michigan and Arizona, and traces the resulting policies (share of state spending for higher education) to events and evidence of policy prominence. Appendices contain study statistics. Contains 18 references. (GLR)