The New Jersey annual report on higher education in the state highlights accomplishments during 1985-1986. Five sections look at the following topics: (1) introduction; (2) the foundations of excellence (funding to reward excellence and excellence throughout the institution); (3) equity/access (minority enrollment initiatives, basic skills, affirmative action, and student assistance); (4) special issues (evaluating the outcomes of higher education, medical education policy initiatives, and sector study commissions); and (5) system status report (size of the system, budget and finance, funding policies and formulas, and state college autonomy). Two appendices provide tables on finances, student academic ability, programs/degrees, enrollment, and faculty and on membership of the advisory boards and groups. A map shows the locations of New Jersey colleges and universities. Twelve figures include special initiative funding to New Jersey collegiate sectors, full-time faculty at New Jersey public colleges and universities, and total expenditures by New Jersey higher education by collegiate sector. (SM)