The origin of deregulation of higher education in Colorado, its effects, and implications for other states are discussed. In "How and Why It Happened," Thomas G. Tancredo traces the development of a new budgeting process, called MOU (memorandum of understanding). Under MOU each governing board is responsible for setting the expenditure level for institutions, setting tuition policies, and retaining and expanding all cash revenues generated at the institutions. State appropriations are based on general-fund support per full-time equivalent student. Tension in legislative-institutional relations was one reason for the change. In "Deregulation's Effects--and Defects," Marilyn McCoy sees efficiency as a potential result of providing incentives and delegating authority and responsibility to college officers and board members. One disadvantage is that the state can impose pay increases for staff without having to pay for them. Finally, in "Lessons from Colorado," Patrick M. Callan explains his reactions to the Colorado experiment. He sees a combination of flexibility and control in the model. The issue is whether this new system has the mix of incentives that, over the long term, produces institutional responsibility and serves enduring public interests. (SW)