This report finds two fundamental problems threatening higher education's ability to help America succeed in challenging times: first, the lack of recognition by state and national leaders of higher education's value; and, second, the lack of recognition by colleges and universities of their need to change. The report presents recommendations to the 15 southern states: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia. This report discusses five ways higher education in the 15 southern states needs to change: (1) alter the balance between teaching and research; (2) redesign what colleges and universities teach; (3) increase the emphasis on quality and productivity; (4) respond more directly to job market challenges; and (5) strengthen connections between colleges, schools, and the workplace. An attachment presents state-by-state background data covering: shifts in public higher education funding; personal income; civilian labor force status; percent of adult population with 4 or more years of college; headcount enrollment of Black students; enrollment growth; federal support for research and development; medical schools; employees by major industry; infant mortality and poverty; college enrollment rates; growth in state and local government expenditures; public higher education share of expenditures; shifting sources of higher education funding; median annual undergraduate tuition; and appropriations of state tax funds for higher education. (GLR)