A survey commissioned by the National Education Association studied how state legislators, especially those in leadership positions, view the current landscape for higher education in their states. The findings are based on in-depth, one-on-one telephone interviews conducted from July 2000 through February 2001 with 64 house and senate education leaders, representing the legislatures of all 50 states. When asked to identify their state's most important strategic needs, state legislators highlighted three key roles for higher education: (1) strengthen and diversity the economy; (2) prepare and train a high-skills, high-wage workforce; and (3) raise the level of educational attainment of the state's population. Legislative priorities and strategies mentioned by legislators are designed to address two major challenges that higher education faces in meeting state needs: improving the responsiveness of the higher education system and accommodating changing demands for access to higher education. State appropriations for higher education operating funds have increased on average 7% annually for the past 3 years, but legislators generally believe that these funds are not adequate. As state budgets tighten, higher education's long-standing role as a "budget balancer" makes it particularly vulnerable to cuts. How higher education will fare in the changed economic environment is difficult to predict. Three appendixes contain a discussion of research methodology, the interview protocol, and a state data table. (Contains 9 figures, 1 table, and 26 endnotes.) (SLD)