The radical restructuring of Alaska's public higher education system, brought on by Alaska's 1986 economic collapse, is described. It is significant because it is the most dramatic general funding reduction to an entire state public higher education system since World War II. Six sections discuss the following: (1) introduction to the University of Alaska (UA) system of higher education (governance structure and the major administrative unit (MAU) structure, enrollments/programs by MAU, and UA 6-year master plan); (2) state economic collapse (the private and public sector's long dependency on oil, January 1986 crash of the wellhead price of oil, magnitude of state revenue drop, and governor's response); (3) UA budget reductions (i.e., in spring of 1986 $15 million was cut for fiscal year (FY) 1987 from FY 1986), assessment of actions taken to meet the cut, and the January 1987 UA order to build the FY 1988 budget with an additional 10% reduction); (4) the decision to look at radically changing the structure of the system (responding to the speed and magnitude of events, disbanding of the budget flexibility task force and formation of a program review team, some restructuring alternatives, and the program review); (5) acceptance of the three university model (decision timetable, problems associated with merging traditional university campuses with community colleges, and campus decision making structures); and (6) comments on the restructuring task to date. The restructuring plan created 3 multicampus institutions from 3 universities and 11 community colleges over a 2-year period. It met the goal of creating a university system that provided essentially the same level of academic opportunities for the residents while reducing considerably the complexity and cost of the delivery system. Problems associated with merging traditional university campuses with open-door community colleges are addressed. (SM)