Research conducted by the public sector, principally at land-grant or state universities, has contributed significantly to the productivity of US agriculture.  The funding of these research programs includes state appropriations, USDA formula funds, USDA and other federal agency competitive grants, and private sector contracts and grants.  USDA formula funding to university research programs has been on a several decade long decline with an increasing percent of research funding coming from grants, including private sector grants. Furthermore, the economic downturn of the past several years has resulted in significant decreases in state funding for most universities reducing faculty, operating budgets and support for staff and graduate students.  Since the early 1980’s, private sector investments in agricultural research and development have exceeded those of the public sector.  In addition to decreases in public sector funding, there is also an ongoing debate on the best mechanism for USDA funding of research via formula funds and competitive grants.  There are fundamental differences in the rationale for public and private sector funding of university research programs.  The private sector must strive to achieve the profits sought by shareholders and thus focus on development of marketable products or processes.  The key role of the public sector will be in basic research plus applied research addressing regionally relevant agricultural production systems.  Many important agricultural issues are not directly related to a product but provide a public good; examples would be research on water quality, waste management, or ecosystem functions.  University-private sector research collaborations will be increasingly important as federal and state budgets for research are reduced.  Important considerations in the development of research agreements with private sector firms include, for example, intellectual property rights, publication restrictions, and royalty agreements.  In addition, university-private sector collaborations will be required to commercialize crop cultivars that incorporate a transgenic trait because most universities do not have the financial resources to obtain the needed federal permits and approvals.  Agriculture is best served by a balanced portfolio of basic, applied, and development research conducted by the public and private sectors.