California's higher education system is not keeping up with the changing economy. Projections suggest that the state's economy will continue to need more highly educated workers. In 2025, if current trends persist, 41 percent of jobs will require at least a bachelor's degree and 36 percent will require some college education short of a bachelor's degree. However, given current trends, the supply of highly educated workers is not on pace to meet that demand. Population and education trends suggest that by 2025 only 35 percent of working-age adults in California will have bachelor's degrees and 28 percent will have some postsecondary training. The state needs to act now to close the skills gap and meet future demand. Without a substantial improvement in educational outcomes, California's economy will be less productive, incomes and tax revenue will be lower, and more Californians will depend on the social safety net. This report recommends several steps the state needs to take to remedy the situation, including updating higher education goals, increasing alternatives to traditional degrees, deciding how to provide adequate funding to achieve state goals, ensuring access for low-income students, collecting information to ensure that progress is being made, and establishing a new higher education coordinating body.