This report summarizes recommendations by New Mexico's Commission on Higher Education for funding the state's two- and four-year colleges in fiscal year 1997-98. Following a preface reviewing the 3-year policy framework and priorities used by the Commission in making its funding recommendations, the first section provides a summary of the Commission's recommendations in priority order; a table of recommended general fund increases for 1997-98, indicating a total appropriation of $518,870,000; a schedule of general fund recommendations by institution; and a table of adjustment factors. The next section provides tables for the state's four- and two-year colleges showing instruction and general formula calculations for revenue credits (i.e., tuition, fees, and transfers) and expenditure levels (i.e., instruction, academic support, student services, institutional support, physical plant, and utility funding), comparing 1996-97 and 1997-98 levels. This section also includes tables of funding formulas, including a proposed formula for two-year student services and the Commission's equipment replacement and building renewal formulas. The next section presents recommendations for non-formula programs, providing data by institution on 1995-96 and 1996-97 general fund appropriations; increases for salaries, benefits, other costs, and utilities; and total 1997-98 recommended funding. Finally, recommendations for unrestricted funds are presented for the University of New Mexico Medical School, New Mexico Military Institute, New Mexico School for the Deaf, and the New Mexico School for the Visually Handicapped. (HAA)