This annual report of the American Association of State Colleges and Universities (AASCU) presents statements from the leadership and papers on issues of prominent importance in the state higher education systems. Following a display of photographs of board of director members, brief greetings from the board's chair, Eugene M. Hughes, and the AASCU president, James B. Appleberry, are presented. There follows a message from the president on the prominence of education on the national agenda and the opportunities for AASCU during this time. Eleven short papers follow: (1) "Budgets Deflate, Tuitions Inflate"; (2) "A Head Start on Reauthorization"; (3) "Fostering Urban Renaissance"; (4) "Revitalizing Rural America"; (5) "Primed for Reform" (teacher education reform); (6) "Partners for Reform" (business, education collaboration); (7) "Ensuring Access and Opportunity"; (8) "Collaborating for Community Development"; (9) "Spreading the Net" (campus internationalization); (10) "Removing the Hurdles" (an AASCU partnership for military personnel: Servicemembers Opportunity Colleges) and (11) "Helping Institutions Find Funding." The balance of the document reports on a communication system newly installed at AASCU headquarters, financial status of the association, and association membership. (JB)