This report discusses the govenment role in higher education in the United States, particularly in relation to the contribution the state and land-grant universities can make in providing answers to a number of seemingly intractable problems which the country must solve in order to maintain its economic and political position in the world. The history of the governmental role in developing state and land-grant universities is reviewed, including the effects of the Morrill Land-Grant Act (1857), the Hatch Act (1887), and the Smith-Lever Act (1914). Next examined is the role of education in the nation's overall competitiveness, including brief discussions of some of the trouble spots, such as weaknesses in the development of basic educational skills, scientist-engineer shortages, lack of minority outreach, and teacher-faculty shortfalls. Finally, the role of land-grant and state universities in specific areas of national need is discussed and recommended governmental actions are suggested to help resolve these needs. Areas examined include agriculture and food production; the health of the nation's cities and urban populations; protection of the environment and natural resources; international relations; research; and the development of the nations' citizenry, including all minorities. Specific recommendations include enactment of the National Initiative for Agricultural Research, expansion of commitment to urban campuses reflected in the Partnerships for Economic Development and Urban Community Service program, increased funding for marine research and technical assistance, increased resources to foreign language and area study programs, maintenance of student financial aid services, recognition of the historically public black colleges, and support of high quality scientific and engineering research programs. (GLR)