The historical pattern of resource allocation in American higher education as exemplified by public colleges in Colorado was examined. The reliance upon average cost information in making resource allocation decisions was critiqued for the special problems that arise from student enrollment decline or steady state. A model of resource allocation for institutional and interinstitutional decision making was designed based on the separation of expenditures into fixed and variable cost components. Measures for full costing, including partial opportunity cost accounting were incorporated into the model. The UniversiLy of Colorado at Boulder was used to examine the cost structure in terms of average, marginal, variable, and fixed cost elements. The change in this cost structure was examined for a five-year period as personnel policies and enrollment changes were stimulated. Specific hypotheses were posited and tested. Results indicate areas of policy change and extensions for further research. It is concluded that a decrease in student number cannot be accommodated with the same policies as the growth period. A bibliography is included. (Author/SW)