The basic authorities and procedures of budgeting for higher education in California and several major issues raised during the course of budget hearings held in 1976 and their respective resolution are discussed. The issues were raised for the most part in appropriations under consideration for the University of California, although most of them had implications for the other segments of higher education in California. The following issues were addressed: enrollment levels, faculty salaries, research and public policy, educational opportunity programs, and the California Postsecondary Education Commission. Observations and conclusions about the budgetary process on the state level are offered, and future implications of the process on higher education in California are considered. Examples illustrative of the range of research results produced by the University of California's research programs are appended. (SW)