Higher education benefits individuals and the state: college graduates are more likely to be employed and earn higher wages than nongraduates, boosting state tax revenues and reducing pressure on the social safety net. However, California's higher education system is not keeping up with the changing economy. Projections suggest that the state will continue to need greater numbers of highly educated workers. Governor Newsom has proposed investing more in higher education to avoid tuition increases, as well as creating an entity to help coordinate California educational institutions. Future challenges, including closing the skills gap, require setting new goals for higher education and making investments to improve educational outcomes and increase the number of college-educated workers. Improving access and completion rates for underrepresented groups, including Latinos, African Americans, and students from low-income families, will also be essential for increasing economic mobility. To ensure that its investments pay off, the state will need to measure progress toward its goals and identify programs and policies that improve student success. Growing demand for higher education is putting pressure on public colleges, and there is widespread concern about college affordability and economic mobility. If the state can respond effectively to the following challenges, it will have a profound impact on California's future well-being: (1) Update higher education goals; (2) Plan for funding challenges in the next recession; (3) Ensure access for low-income students and promote their success; and (4) Collect, link, and use data to improve higher education. [This series is funded by the PPIC Corporate Circle and the PPIC Donor Circle.]