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This report presents the results of a study of higher education in California, focusing on the impending fiscal crisis of increasing demand, tuition, and costs. The study found that at a time when the educational needs for productive employment are increasing, college costs and demand are rising faster than funding. Until now, institutions have covered rising costs by sharp tuition increases; however, unless sweeping changes are made to control costs, such increases will shortly begin to keep Californians from pursuing higher education. The report notes that if current rates of tuition increases continue, by the year 2015 as many as 30 to 45 percent of students may be denied access. The report recommends: (1) that California's political leaders reallocate public resources to reflect the growing importance of higher education; (2) that institutional decision-making systems be restructured to reallocate scarce resources; (3) that institutions pursue greater mission differentiation; (4) that institutions develop sharing mechanisms to improve productivity; (5) that California should develop a strategic plan for allocating limited resources to meet future educational demands; and (6) that all Californians be encouraged to pursue some form of postsecondary education. (MDM)