This report presents a course of action that California and its higher education campuses could pursue in response to economic conditions that have undercut the quality and equality of the system. California's higher education system is described as being in a state of emergency due to unique features: the staggering increase in its college-age population in the next decade, recent budgetary and enrollment history, state budgetary prospects, and leadership response. Three policy approaches are presented, along with assessments of the social costs and benefits and the political feasibility of each. These include: (1) continuation of incremental decision-making and resource allocation, unguided by any long-run strategic plan; (2) phased-in privatization, with resulting budgetary savings earmarked as financial aid for low-income students; and (3) declaration of a state of emergency and appointment of a blue ribbon commission which will work to open as many spaces as possible for California undergraduates while maintaining necessary strength and capacity for research and graduate/professional education. Twelve actions are offered to increase undergraduate educational opportunities for California residents, such as the following: exclude all out-of-state undergraduates from public colleges; suspend new admissions to master's degree programs in arts and science; and allow California students to use state aid out of state. (Contains 14 references.) (JDD)