Trends in public expenditure on agricultural extension are examined for Agriculture Departments in four States. There is little evidence that the share of public resources going to extension has declined. However, new demands have meant that the nature of extension has changed. A strategic approach to examining issues, such as land degradation, for the source of market failure may better guide the use of scarce public resources than the traditional focus on the public goods characteristics of research and extension. The case for evaluating broad functions such as research and extension is becoming more questionable as these functions become more diverse.