The financial condition of independent colleges of Kentucky and eight state universities and the community colleges taken as a unit were studied. Data for the five-year study period 1971-72 to 1975-76 was obtained from forms of the Higher Education General Information Survey (HEGIS) and reports of the Kentucky Council on Higher Education and the Council of Independent Kentucky Colleges and Universities. The overall income-expenditure balance sheet over the period was analyzed using HEGIS reports. Examinations were made of several specific components of the financial problem, including personnel costs, maintenance, indebtedness, student financial aid, and energy cost. The ways in which the 20 member institutions are attempting to cope with the problems are discussed. It is concluded that some mechanism is needed that would increase the confidence of the independent colleges that their enrollments would be stable or would experience some small growth. Such confidence would enable them to do the long range planning that would increase their financial flexibility and assure their future service to the citizens. Statistical data are presented and a detailed analysis of certain income and expenditure data is presented. (SW)