Beginning with the premise that postsecondary institutions in most states will suffer some sort of fiscal crisis in the 1980's, this paper discusses the strategies a state can use in contending with financial problems and turns to California's experiences after Proposition 13 for specific examples. After describing the two probable types of financial crisis, the paper focuses on the problems occurring when falling state revenues or tax and expenditure limitations force the reduction of institutional budgets without reference to enrollment. The paper then considers the different requirements of long- and short-term reductions and lists those budget areas and sources of revenue that are most readily available for state legislative action. Next, the paper suggests that states consider at least three options: (1) establish a discretionary fund for unanticipated emergencies; (2) consult with all concerned parties before making final decisions; and (3) require extensive reports on the effects of reductions. Part II focuses on California's post-Proposition 13 experiences. It begins by describing the bill, its effects on the revenue base of the community colleges, the state's immediate target budget, "bail out" approach, and the restrictions imposed by the Legislature on institutional budgeting. The paper then reviews the state's reductions for its college and university systems. Finally, conclusions are presented for states facing similar revenue shortfalls. (AYC)