This report examines performance funding and performance budgeting in public higher education, based on studies conducted by the Nelson A. Rockefeller Institute of Government (New York). A recent survey indicated that 10 states currently have performance funding for public colleges and universities, that 8 states currently use performance budgeting, and that two-thirds either have performance funding/budgeting or are planning to adopt such programs within the next five years. Existing performance funding programs in 9 states were examined, revealing the existence of from 5 to 37 performance indicators, which vary in many respects. Six of the nine states set statewide indicators for all institutions or campus types, while three allow institutions to choose at least one of their own indicators. Policy recommendations in regard to the use of performance funding and indicators are included. The report concludes by noting that although it is too soon to tell whether performance funding is a fad or trend, the desirability of performance funding, in theory, is equaled by its difficulty in practice. (MDM)