The State Higher Education Finance (SHEF) report is a tool to help policy makers and educators address broad public policy questions. SHEF seeks to inform policy deliberations with information and perspective on financial issues and national trends. The fiscal 2006 SHEF study builds on the work of Kent Halstead, who conceptualized and implemented a report on state finance for higher education and created a file of state financial data that extends back to 1972. The report also draws on surveys and analytical tools established in 1962 by M.M. Chambers and maintained by his successors; their work provides reference points for cross-validation. Three technical papers are included: (1) The Higher Education Cost Adjustment: A Proposed Tool for Assessing Inflation in Higher Education Costs; (2) Adjusting for Interstate Differences in Cost of Living and Enrollment Mix; and (3) Diverse Perspectives on State Higher Education Finance Data. Appendixes include a glossary of terms, data collection instrument, and list of data providers. (Contains 12 figures and 13 tables.) [Report contributors include Kelli Parmley, Natalie Mischler, Charlie Lenth, Gloria Auer, Allison Bell, Susan Winter and Hans L'Orange. For the 2006 report, see ED502192.]