A review of Oklahoma State higher education institutions' awarding of academic credit for physical education (PE) courses and the state funding of such courses evaluated current practice and policy and made recommendations for change. The review examined the use of such courses as they relate to graduation requirements, national standards for awarding credit for physical education, the direct costs of physical education activity courses, and the physical education activity course credit hour production. Central to the review was a study of physical education courses for bachelor's degrees for spring 1992 which used the State Regents' Unitized Data System to run listings of all courses taken in the past 6 years for the 11,441 students graduating in spring 1992. Results indicated that students do not use physical education courses to artificially inflate their grade point averages, to qualify for graduation, or to the exclusion of other courses considered to have greater academic content. Cost analysis showed a net per student cost of $1,470 for physical education. Five policy recommendations advise excluding or limiting the counting of physical education credits from several requirements. Appendixes contain policy statements on retention and requirements for bachelors degrees at state universities; a table of PE course requirements by institution; and a table showing direct costs of PE courses. (JB)