This report presents the results of a telephone survey conducted in 1997 and 1998 of the 50 State Higher Education Finance Officers in regard to performance budgeting and performance funding of public higher education. It was found that 21 states used some form of performance budgeting in public higher education in 1998, up from 16 in 1997, and that 13 states used some form of performance funding in public higher education in 1998, up from 10 in 1997. The 1998 survey indicated that half of the states employed at least one of the two funding programs, and that 11 more were considering adopting such programs in the next 5 years. Eight states had both performance budgeting and performance funding in 1998, and 14 more were considering adopting both programs in the next 5 years. The report also notes that performance funding is becoming less comprehensive and more circumscribed in its goals, and that state mandates and prescriptions are declining, allowing coordinating boards, with campus participation, to initiate less ambitious funding programs. (MDM)