State must see higher education as investment

04-19-2007

Despite the promise inherent in the season, spring is often a time of concern for those who care about higher education in Michigan. Each year, as the state prepares its annual budget, we face the prospect of insufficient investment—or even disinvestment— in our colleges and universities.

This year, with the state confronting a budget shortfall of approximately $680 million, Michigan is at a crossroads. How we handle this budget crisis will have ramifications for the economic health of the state for years to come. Near midnight on April 17, House democrats passed a budget plan that relies heavily on cuts to balance the budget. If approved by the senate and signed by the governor, this plan would result in deep cuts to higher education.

Overall, Michigan’s 15 public universities would receive no increase in fiscal 2007, a $43 million loss in proposed funding that would effectively return budgets to fiscal 2006 levels. In addition, the plan included deferment of the August payment to universities ($66.5 million) until next fiscal year. This would come on top of a $66.5 million payment delay already adopted under executive order.

For Michigan State University, the fiscal year 2007 loss would be $8.5 million and the August payment delays would total approximately $30 million. These cuts and deferrals would come on top of approximately 13 percent in general fund reductions sustained since 2000. During this same period, MSU enrollment increased 5 percent, and we have consistently implemented cost-cutting and efficiency measures.

What is most important to consider, however, is what these proposed cuts will mean to the state of Michigan and to the families who make their homes here. Today, just over 15 percent of Michigan residents age 25 and over hold a bachelor’s degree, with another 8 percent or so holding an advanced degree. Yet Michigan’s economic future—and the future quality of life of its citizens—depend on fully embracing the knowledge ecomony of the future.

Former U.S. Federal Reserve Chairman Alan Greenspan once talked in intriguing terms about the “weightless economy” where “most of what we currently perceive as value and wealth is intellectual and impalpable.” In Michigan, we must attract and grow knowledge-based businesses and industries. We must diversify the economic mix by pursuing the areas with growth potential that best fit the established and emerging strengths of the state, areas including bioeconomy, advanced manufacturing and life sciences.

We must make funding and policy decisions that support the development of human capital, because in the knowledge-based economy, human capital is the engine. If we want a better future for Michigan, higher education must be viewed as an investment, not an expense.

If the cuts proposed by House democrats become reality, there will be negative results. First, public universities will be forced to raise tuition rates much more rapidly than we, legislators or the public find palatable. If cuts were to be reflected in the 2007-08 appropriation, we would need a 12 percent increase in tuition. In the event that the deferrals also become base reductions the necessary tuition increase would approach 20 percent. The alternative to such an increase would be larger class sizes, reduced course availability, reduced services for students and a slow down in funding for university research and innovation—a critical economic driver. In short, both educational quality and the pace of innovation would be at risk, perpetuating Michigan’s problems in competing for investment from business and in attracting the creative class to live and work here.

The governor and lawmakers face a daunting task. Having served as a member of the governor’s special task force advising on the state’s fiscal crisis I know there are no easy answers. But I do know that a cuts-heavy strategy that continues to gut higher education will deepen the state’s current problems and shortchange our citizens. We must recognize that our future path is different from our past, and we must make the hard choices now that will pay off in the brighter future we all yearn for Michigan to achieve.

You can follow the progress of the state’s budget process and the potential impact on higher education at opb.msu.edu. This Web site will be updated as changes occur.

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