State budgeting for higher education is a complex, multifacted process which is influenced by conditions outside both state government and higher education including the historical traditions, political culture, economic and demographic aspects of a state. Noted is the need of higher education to compete with other policy areas for resources and yet retain its autonomous nature. This monograph addresses the following budgeting concerns: environmental factors framing the state budget process for higher education; how these factors affect state budgeting; the primary elements of the state budget process for higher education; how the state higher education budget links resources with state objectives; accountability; costs, productivity, and quality; affordability; economic development; minority and nontraditional students; independent higher education; and the implications of what we know about state-level budgeting for higher education. It is emphasized that all participants, from the state level agency to the department within an institution should be aware of the overall picture of state budgeting for higher education. Includes 190 references. (LPT)