This report briefly reviews the history of federal support of higher education in Canada and then turns, in Part II, to an overview of several factors which contribute to uncertainty over the future of federal support. It concentrates on mechanisms for federal support, and though it does not advocate a single funding option, it proposes several options. In addition, the report provides the Association of Universities and Colleges of Canada's position regarding federal support. This position statement calls for the federal government to continue playing a role, jointly with the provinces, in the support of higher education and university research, subject to the understanding that in the case of higher education, the federal and Quebec governments need to negotiate arrangements appropriate to Quebec's distinctiveness. In addition, the report addresses issues concerning established program financing (EPF) including restoring the original EPF formula, reforming the EPF; and replacing the EPF with a new arrangement. Appendices provide charts outlining the decreasing availability of EPF cash, and a review of the selected options for federal funding of university education and research. (GLR)