The importance of legislative initiatives to improve postsecondary education is discussed, along with mechanisms that legislatures have used to induce change in higher education, and guidelines for action. Structural obstacles to improvements that have confronted most public colleges include lack of clear priorities, fragmented responsibilities, lack of incentives for improvement, and lack of information about effectiveness. In attempting to promote improvement in higher education, state legislatures have two main tools: (1) changing the budgetary allocation process to provide special funds for needed improvements, or to reward and encourage successful performance; and (2) exerting control over college behavior directly through regulation or statute. Budget-based approaches include modifying enrollment-driven formulas; linking a portion of total dollar allocation to each college, based on demonstrated effectiveness (performance funding); and special-purpose funds. Regulatory approaches include testing as a condition for advancement, testing as part of instructional evaluation, curricular requirements, use of existing audit and review procedures, and reporting and data collection requirements. (SW)