February 24, 2015

Senate & House Appropriations Higher Education Subcommittee

February 24, 2015

Testimony of Lou Anna K. Simon
President, Michigan State University

Honorable members of the Senate and House subcommittees, I want to start by thanking you for your advocacy for higher education. In particular I appreciate the letter your committee chairs, Senator Schuitmaker and Representative McCready, sent to the governor early this month seeking restoration of higher education funding to 2011 levels.

I appreciate that you made the very direct connection between state appropriations and tuition rates in the letter, and that you acknowledged the state’s long-running disinvestment in its public universities. As the Business Leaders for Michigan (BLM) pointed out in their report earlier this month, Michigan ranks 42nd for state support for public higher education and has the fourth least affordable tuition levels in the nation.

Even with last year’s appropriations increase, universities have yet to recover from the 15 percent cut the administration made four years ago. Today Michigan State remains 6.82 percent below the prior funding level.

We are grateful for the support of higher education advocates including the BLM, who are pressing for Michigan to become a top-10 state in a number of important categories. Michigan’s universities currently receive $3,700 less per student than 10th ranked Mississippi. And with Michigan spending nine times more on each prison inmate than it does for its students, we’re one of only two states spending more on prisons than public universities. There’s something wrong with this picture.

But I also appreciate the fiscal circumstances confronting the state this year. We’d certainly like to have seen a bigger increase in the governor’s proposed budget, but we’re grateful for the one we got—realizing that other line items will see cuts.

We all hope this is just a bump in the road toward restoration of state support and sustained, dependable investment in the state’s most important product: I’m talking, of course, about its people.

I’m sure I have a lot of company in this Legislature in my belief in the primacy of talent as the chief economic engine of the 21st century. Today, in the global leagues we play in—whether we’re talking about states or universities—whoever has the best talent wins.

About Michigan State University

We’ll leave an information sheet to give you a metrics snapshot of MSU. But I want to note that this month marks the 160th year since MSU’s founding.

My very first predecessor concluded his 1858 report to the state saying that “the institution should be good enough for the proudest and cheap enough for the poorest.” That’s as important today as it was then.

Michigan State remains a predominantly middle-class institution, with three-quarters of our students still coming from families with incomes of less than $125,000.

To improve affordability for students, especially those just above Pell eligibility, we’ve tripled General Fund financial aid in 10 years to $120 million. This year 65 percent of our students get some form of financial aid, and 22 percent of undergraduates received Pell grants in fiscal 2014.

If “the market” is a reliable indicator of quality—if we agree that people recognize good value—MSU seems to be on the right track.

Freshman applications have risen from fewer than 22,000 10 years ago to more than 33,000 now. International applications for next year so far are flat or slightly lower, but out-of-state applications are surging. Because we are expensive for non-Michigan students, who tell us they come here for our programs, we take that as another sign of our growing nationwide reputation for quality.

Michigan freshman applications have hovered around 17,000 a year since 2007. We all know that Michigan K-12 enrollments will continue to decline, after dropping 11 percent in the last decade.

Michigan State enrolls about 5 percent of Michigan high school graduates, who account for three quarters of our undergraduates. Each of them realizes a tuition discount of between $6,000 and $8,000 a year compared to their full-price, out-of-state counterparts.

I’m sure everyone here is familiar with data that associate a college degree with increased earnings and well-being throughout a lifetime. Michigan State is a significant engine of such opportunity. About a third of all our undergraduates are first-generation college students, as was I when I came here to earn my PhD in the 1970s.

The data sheet we brought gives you a sense of MSU’s student debt profile compared to other benchmarks. Today, 54% of our students graduate with no debt at all, and for those who do borrow, the average debt at MSU is about $25,800, well below the state and national averages.

That is not to say we have done enough, but MSU has worked hard to remain affordable, especially given the challenges we faced regarding state disinvestment over the last fifty years. To that end, MSU's cost of education, as measured by appropriations per student plus tuition per student, only rose $65 above inflation between 2000-01 and the 2011-2012 school years. The difference was who paid. During that time, about $4,000 shifted from the state to the student.

When I’m asked about student debt, I have to point out that the biggest problems afflict those who run up debt but don’t earn a degree! So we’re taking steps to improve student success, including in the important STEM courses.

Some of that is taking place through our Neighborhoods initiative, which directs academic and other support to students in the residence halls where they live. We also are piloting programs such as the Spartan Success Scholars, targeting low-income/first-generation students for additional support. And preliminary numbers indicate progress, with fewer of those students this term on academic probation than we would otherwise predict.

We’re sharing the Neighborhoods concept with partner universities around the country as part of the University Innovation Alliance, and in turn we’re tapping some of them for expertise in applying sophisticated data analysis to better tailor academic support interventions to students who are at risk of failure.

This year we crossed the 50,000-student milestone for the first time. It wasn’t our goal, necessarily, but we were ready. We’ve added about 5,500 students in 10 years, but I don’t expect anything like that sort of increase in the years ahead.

Once they come to MSU, we’re retaining students a little better and we continue to boost our graduation rate. Our six-year graduation rate rose from 66 percent in 1992 to 71 percent in fiscal 2004 to 78 percent currently, outperforming our predicted rate by 8 percent—the second highest margin in the Big Ten.

Understand that the sort of education we are being called to deliver to prepare students for the 21st century—one heavier in STEM (science, technology, engineering and mathematics) and more oriented toward real-world experience, is costlier than the education of yesterday. This reflects the cost of new technology and expensive laboratory facilities. We’ve only added a net two classrooms since the 1970s, and those we have renovated required costly upgrades.

Our STEM degree awards in the last four years, I should add, rose 13 percent while the balance of earned degrees were flat.

Ultimately, expanding the student experience in the 21st century means developing what we’ve been calling T-shaped graduates. I’m talking about people who are deeply analytic thinkers in at least one discipline and at least one system, yet broadly aware and collaborative, with boundary crossing competencies including communication, collaboration, project management, critical thinking and global awareness.

Such graduates are closer to the sort of people employers tell us they need, people who can bring real value to an organization much more quickly. We’re working to do this both in the classroom and out, including co-curricular activities such as internships, study abroad, undergraduate research, service learning and entrepreneurship. Those kinds of activities are associated with greater student engagement while in school, and greater workplace engagement after graduation.

Michigan State is hosting a second annual T-Summit next month, in partnership with IBM, to talk about how to better develop such graduates fit for the challenges of today and tomorrow.

Research

Our externally sponsored programs, including research, exceed half a billion dollars again this year.

Each month brings further progress on the Facility for Rare Isotope Beams, which will take the university and the community to a higher level of science and knowledge-economy jobs. We conducted a 30-hour continuous concrete pour in December, which utilized concrete capacity for a 50-mile radius and required more than 300 trucks. Another “big pour” is pending as soon as the weather breaks.

Likewise, our Biomedical Engineering Facility set for completion this year positions us to seize future opportunities and attract additional knowledge economy jobs. It represents the first state capital outlay to MSU in more than a decade and a sound investment in the future.

Michigan State’s engineering degree programs today are limited by the number of engineering faculty we can support, and the new building and emerging programs such as one in computational biology will help accommodate growth in promising fields of inquiry.

There will be an influx of medical researchers when our Grand Rapids Research Center opens in 2017. We anticipate about 24 principal investigators and their research teams to move in initially, with four floors of the laboratory built out to accommodate a total of 33 teams. An additional floor will be shelled, providing capacity to support 44 research teams in total.

Dr. Erik Shapiro of our radiology department is leading an exciting research program now underway. He’s a recent recruit from Yale’s medical school. He’s pursuing opportunities in regenerative medicine involving use of MRI imagers to track individual cells that are converted into adult stem cells and then reintroduced into the body.

And our international stature is connecting us to important infrastructure elsewhere, including the IceCube Neutrino facility in Antarctica, which we joined this past year.

We will continue to seek fundamental discoveries in science, significant advances in computation and big data, and advanced and sustainable improvements in engineering. Such challenges are aligned both with national priorities and discovery opportunities.

But we’re not neglecting programs of more immediate interest to Michigan. Last month in Rome I helped open the first Global Conference on Inland Fisheries, which we produced in partnership with the Food and Agriculture Organization of the United Nations. We’re developing a program with the FAO to raise the profile of freshwater fisheries, and appreciation for their environmental, economic and social importance around the world.

We’re also continuing research of interest to the auto industry. Last month we were named a core partner in a national consortium to advance research and development of composite materials. We will lead the light-and heavy-duty vehicle component of the program, dubbed the Institute for Advanced Composites Manufacturing Innovation.

Budget cuts

Your invitation to provide testimony asked me to discuss what budget cuts were implemented to deal with the reductions in state aid. What follows is a representative list, rather than a comprehensive report about those cuts. In the years following the onset of the recession and subsequent appropriations adjustments, Michigan State made $125 million in cuts, modifying or eliminating more than 40 academic programs.

We cut health care expenditures 10 percent in FY 2011, capped our exposure to health care cost increases at 5 percent and eliminated post-retirement health care coverage for new hires. We more recently introduced a high-deductible hybrid plan to our health plan options. I would note that we have actually been able to beat that 5 percent target, keeping our increases well below the cap eight out of the last nine years.

You should know that we were a leader in eliminating defined-benefit pension plans back in the 1970s, so our pension liability is slight (approximately $7 million) and fully funded.

I mentioned the governor’s proposed budget, and because you asked for feedback, I’ll just add here that I think our public universities, certainly MSU, would be better served by maintaining a tuition cap no lower than last year’s 3.2 percent.

Recall that last year’s cap came with an appropriations increase three times bigger than we’re looking at now. A cap more on the order of last year’s would give Michigan’s public universities the flexibility we need to maintain our quality and value.

You also asked for our thoughts on the current funding formula, which has been in use for three years now.

I agree with the BLM that performance metrics are a useful way to evaluate value and promote improvement. The current formula isn’t perfect from our standpoint, but universities are no different from any other business or organization: We need consistency in order to plan, so I would ask you to resist the temptation to make changes to the formula at this time.

Thanks for your time, and I’m happy to take your questions.

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