The authors begin by noting that, while much has recently been written about federal interference in higher education, little research and writing has concerned itself with the role of the state in governing, controlling, and supervising higher education institutions. Part 1 of this paper presents, in order, the most important functional relationships between the state and higher education, indicating the authoritative sources relating to each, and citing some of the principal omissions in the research. It concludes with an analysis of the overall research on the major agencies and their interrelationships. The important relationships covered are in the areas of budgeting, program review, planning, and information systems. The relationship between private colleges and universities and the state is also covered. Part 2 describes trends and issues currently confronting higher education that will influence the direction of state roles and functions over the next two decades. These trends affect enrollments, the faculty, the economy, and the society. Part 3 summarizes the major issues and the research needs. A bibliography is included. (Author/IRT)