March 23, 2017

House Appropriations Higher Education Subcommittee

March 23, 2017

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

I want to thank you, Representative LaSata, and committee members, for inviting me today. We are always eager to talk about Michigan State University and the university’s ongoing commitment to opening world-class opportunities to the people of Michigan.

A global asset for Michigan

Michigan State builds stakeholder value as one of the world’s top 100 universities, while serving Michigan first. We manage to do this despite diminished state support over a long period and limiting tuition increases, focusing on increasing external support through donors and grants, efficient operations and intensifying our ongoing commitment to quality, inclusion and connectivity.

Michigan State claims 35 academic programs ranked in the nation’s top 25. Eighteen of those are in the top 10 and eight are ranked number one in the nation.

We work side-by-side with residents in every county in Michigan through Extension, research and service programs. And we work in communities halfway around the world, because we understand that what we learn in one place can be applied in another. We are a top university for study abroad and international enrollment, and global employers make MSU a top recruiting ground.

But nobody enrolls more Michigan students than MSU—more than 35,400 last fall. Three-quarters of our undergraduates are Michigan residents, including 90 percent of our transfer students.

We admit 5 percent of Michigan’s graduating high school seniors each year. That commitment comes at a price—the differential between what we charge for in-state tuition and for out-of-state and international students. We consistently operate with a greater proportion of state-resident students than our Big Ten peers—forgoing approximately $90 million in annual tuition revenue by that measure.

Michigan State has worked diligently to comply with state tuition policy in challenging times, while continuing to build the excellence of our academic, research and outreach programs. Our undergraduate program on campus and our outreach across Michigan tap the world-class expertise of our faculty members to bring cutting-edge knowledge and broad experience to our families, businesses and communities. We are elite, but not elitist. That is our 21st century land-grant legacy. We prepare students to be successful, wherever their careers take them

I’d like to take a few minutes to speak directly to the three issues you asked me to discuss.

Funding formula

Michigan’s higher education appropriations formula remains a concern for MSU, something we’ve discussed in prior years appearing before the committee. This year the formula would increase funding about 2.4 percent, keeping us more than $1 million below 2011 funding.

Our chief concern is that the formula does not fully reflect the university’s achievements in promoting student success, nor take into account the number of lower-income students we enroll. These aren’t minor considerations. They go to the heart of higher education’s promise for elevating prospects not just for the sons and daughters of Michigan citizens, but for the long-term well-being of our communities and state.

The current formula disadvantages Michigan’s three Research I universities (MSU, University of Michigan and Wayne State University) among the state’s public universities by not accurately reflecting our impact on driving the state’s economy forward through development of talent that engages the leading-edge industries that Michigan needs. We would like to see the formula adjusted to better reflect that impact.

Pell students

Accommodating students who need financial aid is an important service your colleges and universities provide the people of Michigan. It means the citizens most in need of a vehicle for economic mobility—that is, a degree and everything it signifies to an employer—can earn it. Possessing a degree confers more benefits to this group than any other, and so to the state itself.

So, you should know that Michigan State enrolls more Pell Grant recipients than any other university in the state, up to 8,800 in some recent years. That’s nearly a quarter of our undergraduates. It’s about 3,400 more Pell students than the average Michigan university, and almost that much more than our peer universities across the country.

The average MSU Pell recipient gets about $4,300. Additionally, federal student loans went to more than 17,000 of our students, or about 44 percent of them, averaging more than $7,000 a year. All told, that means $159 million annually in federal grants and loans are helping students attend Michigan State.

In fact, Bridge Magazine recognized MSU as the best institution in Michigan for opening economic mobility to low-income students and the only one whose low-income students out-earned more affluent students 10 years after graduation. We were rated in the top five for average earnings, graduation rate, and average annual net cost.

I ask that Michigan duly support those institutions that do the most to open higher education to lower-income residents, as well as those demonstrating their effort by reflecting above-average proportions of Pell students in their enrollments. I would suggest that both the percent of an institution’s Pell recipients and the total number be included in the formula to acknowledge overall impact as well as effort.

Student success

Enrolling and supporting these, or any, students wouldn’t make much sense if we didn’t deliver the goods. By that I mean ensuring that students are able to earn their degrees in reasonable time, reasonably unencumbered by debt, and that those degrees make them competitive in the career marketplace.

New U.S. News rankings released this month add two more MSU programs to its list of top-ranked graduate programs, African History and Supply Chain/Logistics. The graduate supply chain program now joins its undergraduate program counterpart at number one.

Elementary and secondary education programs have topped the rankings for 23 consecutive years. Also in the College of Education, Rehabilitation Counseling remains at the top of its class. Overall, the College of Education has eight programs ranked in the top 10 in their respective fields. Our graduate program in Industrial and Organizational Psychology, housed in the College of Social Science, remains at the top after two decades. The program in Nuclear Physics in the College of Natural Science remains at number one. We train about 10 percent of the nation’s nuclear science PhD’s and are well positioned to support and leverage the new Facility for Rare Isotope Beams, which I’ll discuss later in my testimony.

Student debt is a source of continuing concern across the country, but you should know that MSU’s record is good. Fewer than half—43 percent—of MSU students graduate with debt, which is about two-thirds the state and national levels. Michigan State graduates’ debt—about $26,000 on average—is also well below state and national averages, which both exceed $30,000. To put it in perspective, that’s about the level of a new vehicle loan, but unlike a vehicle, the assets behind the loan—the degree and the education—don’t depreciate.

Not that there isn’t justifiable concern across the country about student debt, but certain for-profit actors in higher education have created much of this problem. Michigan State students’ default rate has been declining for the last few years, and at 3.6 percent is much lower than the national rate. Because high-value college educations such as those from MSU pay for themselves many times over in the span of a career, the biggest problem with student debt is when somebody simply doesn’t graduate. So you want to look at who a university enrolls, how many graduate and long it takes them, and at the quality of the preparation they receive.

Michigan State’s six-year graduation rate, including those who went on to graduate from other institutions, is 82 percent. That is very good, and above what would be expected given our student demographics. The average, first-time undergraduate actually takes 4.2 calendar years to graduate.

Michigan State is increasingly recognized as a leader in promoting student success. We have reduced our freshmen academic probation rate (GPA under 2.0) from this cohort from 9.7 percent in the fall of 2013 to 9.2 percent in 2014, 7.9 percent in 2015 and 7 percent this year. That works out to hundreds of students who will have a better shot at graduation, because students on probation are less than half as likely to graduate.

Supporting students

What’s been happening since 2013 to cause this improvement? That’s when we introduced our Neighborhood Student Success Collaborative, which is a campus residential cluster-based student support initiative. The Neighborhoods program locates academic support and even health services within each of the five residential areas, with off-campus students served by the North Neighborhood center at the MSU Union.

We provide on-site support services with earlier identification and engagement of students who are at risk of academic difficulty. We deliver interventions through multi-functional teams of professionals in each Neighborhood center. We’ve found that students who use Neighborhood services have higher GPAs than those who don’t, and are more likely to persist to their second year and beyond. The number of first time entering undergraduate students returning for their first fall semester after their original enrollment is now 92 percent, which compares to 68 percent nationally. Nearly 82 percent reach junior status or better by their third spring semester. That’s the highest rate for us in at least the last 15 years.

We are leveraging our residential neighborhoods to better scale and deliver university support services where people live. It’s an approach we are sharing with our peers nationally through the University Innovation Alliance, even as we learn about and evaluate the kinds of things that are working for our UIA partners. And we’re supporting this initiative with efforts to innovate our academic programs, including revamping mathematics courses to improve student learning. This year we also opened our Hub for Innovation in Learning and Technology, which supports development and application of new methods of teaching and learning across the university.

We also know student success is enhanced by high-impact experiences outside of the classroom, and these too are areas of increasing emphasis at MSU. We’re affording plenty of opportunities for all undergraduate students to internalize and exercise the qualities of entrepreneurship with the addition of a new entrepreneurship minor across all of our colleges. The MSU Innovation Center is integrated into that program as it strives to create connections at the interface of academia and the real world of commerce, markets, and entrepreneurs. We do this in the classroom, in our creative centers such as the Hive, where students can exchange and nurture ideas, and in the Hatch, where students launch their own companies.

Among other high-impact experiences, about two-thirds of our graduates held internships; more than a third of our undergraduates engaged in research; a quarter studied abroad (versus 10 percent nationally); and half reported volunteer service experiences.

Along those lines, Michigan State’s nationally-recognized service-learning program recorded 27,475 registrations for community service in 2016. These kinds of focus on connections with the community and the world helped MSU took the top spot for student engagement among public research universities in last year’s Wall Street Journal/Times Higher Education college rankings. Michigan State instills a level of student engagement, the report’s authors noted, that is more often found at small and denomination-affiliated colleges, and rarely at large research universities.

It should be noted that high-demand STEM degrees have been an increasing proportion of those MSU has awarded. Our STEM credit hours recorded by students have risen more than a third in the last 10 years, but the cost for facilities and instruction has been steep. In that period, STEM instruction-related costs have more than doubled.

But what do our outcomes tell us? Our studies tell us that 92 percent of MSU alumni reported they were employed or continued their education within six months of graduation, and of those reporting employment, 62 percent stayed in Michigan. Michigan State strives to develop people who are competitive anywhere in the world, but most choose to stay here not because they have to, but because they want to.

Reverse transfer and other community college arrangements

You asked me to discuss our arrangements with Michigan’s community colleges. Michigan State maintains articulation agreements with 10 community colleges as well as arrangements for continued education for students in the health professions. That includes online options for registered nurses seeking to advance their careers by earning bachelor of science degrees.

We also are partnering with nine community colleges on a proposed food processing workforce development program, which you might hear discussed in the agricultural budget session later this morning.

Michigan State supports access for students who have chosen a different option to start their college education. In total about 21 percent of our entering students were transfer students, approximately 1,500 transfers a year from Michigan’s community colleges and other universities. As I mentioned earlier, more than 90 percent of them are Michigan residents.

First generation college students

About 11 percent of our students are first-generation students, reflecting MSU’s role as an accessible engine for economic mobility. I’m also glad you asked about this group of students, because I was one of them. I was the first in my family to attend college, thanks in great measure to the support of taxpayers in Indiana in the 1960s, who helped support my attendance at Indiana State University as you do for Michigan students. In those days the level of public support for public universities was far greater than today.

In Michigan, per-student support since 1960 has declined by approximately $4,000 when adjusting for inflation and closely approximates funding levels from the early 1990s on a nominal dollar basis.

Also since then, the state of Michigan has dropped its student aid program, while in the period between 2006 and 2016 MSU has increased our own financial aid to students by 68 percent. Our general fund’s contribution toward that student aid has risen 170 percent in that period. In the aggregate, MSU is a very middle-class institution. We continue to enroll and graduate students of low and moderate family incomes at the same levels as prior years, in spite of years of flagging appropriations.

Supporting the state

Michigan State’s total economic impact on Michigan exceeds $5 billion annually. That’s from the reports compiled annually for the University Research Corridor by the Anderson Economic Group.

Let me illustrate that number with an example of our engagement with just one growing industry in Michigan. We should all be proud that Michigan agricultural producers offer some 300 commodities and grow one of the greatest varieties of agricultural products in the nation. Craft brewing is one way Michigan entrepreneurs are adding value to Michigan agricultural products, and that’s an area heavily supported by MSU. Our recent activity ranges from reviving a variety of barley suited to Michigan growing conditions and working with hops farmers around the state to develop a new cash crop to partnering with a company to tap brewery wastewater to generate clean energy. If beer doesn’t suit your personal taste, we’re active in supporting craft distillers and, of course, our flourishing wine industry.

The MSU Product Center, which is affiliated with MSU Extension, in fact has help create or expand 455 agri-food and natural resources-based businesses, creating over 1,270 new jobs, and has helped its clients increase sales by over $325 million.

MSU Extension itself leverages more than $75 million in federal and state support, including more than $24.5 million in grants to focus efforts on assisting the agricultural sector; preparing Michigan youth for their future; providing programs on obesity training, food safety, and chronic disease management, as well as other community programs. We also have a wide variety of agricultural and natural resources-focused research ongoing at our 13 outstate AgBioResearch stations.

At MSU Technologies and Spartan Innovations, which are part of the MSU Innovation Center, MSU’s faculty and graduate students turn their ideas into actual products and companies. Last year we set records for annual licenses and options of intellectual property (66), new invention disclosures (179), grew corporate partnerships 18 percent and concluded 221 research agreements.

Our medical schools support a community based model for physician training. They maintain affiliations with over 50 hospitals across the state, which provide health care to 70 percent of state residents.

Research

In many ways, the world requires more from us. The pace is faster and the problems more complex. The ability to anticipate change and respond nimbly is crucial, and it will differentiate the 21st century’s leading institutions of higher education. Michigan State’s Global Impact Initiative will propel MSU forward, allowing us to aggressively pursue big ideas, innovation, and global impact.

We are recruiting more than 100 new faculty investigators to help accelerate solutions to what we call “grand challenges.” We will focus on new and enhanced research around energy; health; education; the environment; national security; and global development. We are also targeting emerging priority areas including advanced mobility; computation; advanced engineering; genomics; plants/food/environment; antibiotic resistance; precision medicine; and advanced physical sciences.

Michigan State has built a good foundation for our ambition. For the 2012-2015 period, MSU is fourth in the Big Ten for rate of change for National Science Foundation Higher Education Research & Development report R&D expenditures. The combination of Department of Energy and National Science Foundation funding is best in the Big Ten by 25 percent.

Sponsored awards now stand at $589 million which reflects an increase of more than 50 percent over the last 10 years. These increases are in the face of stable federal research budgets except for increases in the National Institutes of Health.

The U.S. Department of Energy’s $730 million Facility for Rare Isotope Beams (FRIB) being built on our campus is on budget and ahead of schedule. It will be the world’s most-powerful rare isotope beam facility upon completion in 2022. Providing over 1,000 new rare isotopes never before produced on Earth, it will more than double the research opportunities available in nuclear physics. Many of those will likely have properties critical to discoveries in key areas such as national security and nuclear medicine.

FRIB will strengthen and diversify Michigan’s economy by leveraging the investment in cutting-edge research and training the next generation of science leaders. From construction through operation, it is expected to generate accumulated wages totaling $1.7 billion and add $4.4 billion to the state’s economy. It will create up to 1,500 Michigan jobs at the height of the construction phase and about 1,000 permanent jobs while operating.

The DOE Office of Science funded $635.5 million of the $730 million construction budget while the State of Michigan invested $94.5 million. About 83 percent of total construction expenditures will go directly to Michigan businesses and workers generating an average of $149 million in in-state purchases, annually. The state’s investment in FRIB is expected to generate $205 million in tax revenues—more than a two-to-one return on investment—and $831 million in higher gross state product.

Cost containment

Michigan State has for many years taken a serious approach to cost containment. We’ve made in excess of $105 million in reductions and reallocations over the past 10 years. Each year we reallocate approximately $6 million through our Performance Efficiency Reinvestment Fund, which invests in areas of high opportunity.

Conservation and efficiency improvements in our utility operations save us more than $5 million annually and we record some of the lowest energy consumption per square foot in the Big Ten.

Much of our proactive approach is reflected in our work to control employee benefit costs. To begin with, MSU is a lean operation, ranking second among the 14 Big Ten schools in number of students per employee.

We worked with our nine unions to cap annual health care outlays at 5 percent so now our employee health care cost increases have been at or below national indices for eight of the last 10 years.

And we eliminated post-retirement health care benefits for new hires in 2011, after shifting to defined-contribution retirement benefits way back in 1973. The bottom line is that our pension obligation, which is only $7 million, is fully funded today.

Conclusion

All I’ve told you is just a glimpse of why we believe that MSU deserves to have state support restored to the pre-2011 level and maintained commensurate with our performance and our value to the people of Michigan.

By supporting public higher education, you support Michigan residents’ ability to compete in a global knowledge economy. By supporting Michigan State, you are supporting our three-dimensional mission of education, research and service to Michigan communities. Michigan citizens deserve to have high expectations, together with the actual means to achieve them. With your support, MSU is committed to doing just that.

Supplemental slides for March 23, 2017 testimony

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