The report provides information on the current issues, financial priorities, and legislative concerns faced by higher education at the state level, based upon observations of State Higher Education Executive Officers in all 50 states, Puerto Rico, and the District of Columbia. The most important tasks facing higher education were identified as strengthening the teaching and learning of undergraduates, and increasing the success of minorities. Other issues of concern were accountability and effectiveness of higher education, support for research and economic development, review of institutional roles and missions, need for new faculty and competitive salaries, reforming teacher education programs, linking levels of education, adequacy of physical facilities, and tuition and student costs. Financial priorities, in order of concern, were: financing basic operating costs, competitive faculty salaries, physical facilities/infrastructure, academic improvement, and expansion/growth. Primary legislative concerns, in rank order, were higher education's role in economic development, institutional accountability and effectiveness, teacher preparation, increasing base funding levels, level of tuition and student fees, capital construction and facility maintenance, minority student achievement, student transfer/articulation across institutions, faculty salaries, and demographic shifts/population growth or declines. State policy and program initiatives to improve undergraduate education are discussed. (JDD)