Financing higher education requires political leaders, policymakers, and educators to address broad public policy questions, including ascertaining: the levels of state funding to colleges and universities that are necessary to maintain the economic and social well-being of the American people; the tuition levels that are appropriate given the costs of higher education, its benefits to individuals, and the desirability of encouraging participation; the student financial assistance that is necessary to provide meaningful educational opportunities to students from low- and moderate-income families; and how colleges and universities might use available resources to increase productivity without impairing the quality of services to students. The State Higher Education Finance (SHEF) report is produced annually by the State Higher Education Executive Officers (SHEEO) to broaden understanding of the context and consequences of multiple decisions made every year in each of these areas. No single report can provide definitive answers to such broad and fundamental questions of public policy. What the SHEF report does provide, however, is information to help inform decisions in these areas. Toward that end, this report includes: (1) An Overview and Highlights of national trends and the current status of state funding for higher education; (2) An explanation of the Analytical Tools and Measures used in the report; (3) An analysis of National Trends in Higher Education Revenue and Enrollment, in particular, changes over time in the public resources available for general operating support; (4) A description of the Sources and Uses of State-Level Funding for Higher Education, including state tax and non-tax revenue, local tax support, tuition revenue, and the proportion of this funding available for general educational support; (5) Interstate Comparisons--Making Sense of Many Variables, using tables, graphs, and two-dimensional displays to locate and compare states; and (6) Indicators of Relative State Wealth, Tax Effort, and Allocations for Higher Education, along with ways to take these factors into account in making interstate comparisons. Appended to this report are: (1) Glossary of Terms; (2) Data Collection Form and Instructions; and (3) List of State Data Providers. (Contains 12 figures and 13 tables.)