Hearings on the effects of the Reagan Administration's fiscal year 1984 budget on higher education are presented. The presidents of three leading research universities and the president of the Association of American Universities (AAU) describe the effects of reductions in federal funding for education, research, and development on the country's ability to compete in an international marketplace. The relationship of higher education and innovation to the nation's economy is also addressed. The chairman of the National Governors' Association (NGA) and three governors representing the NGA share their organization's official response to the administration's 1984 budget. The following three propositions are addressed: (1) programs aimed at increasing the volume of research simply by raising budgets for the purchase of research will fail, unless attention is also paid to the health of universities; (2) weakness at any level of education will eventually undermine quality at all other levels; and (3) science cannot be force fed into useful technology. Appended materials include: executive summaries of the two reports--"The Scientific Instrumentation Needs of Research Universities" and "The Nation's Deteriorating University Research Facilities"; and data and narrative materials submitted by the NGA. (SW)