The Michigan Future approach to higher education

For the last month or so most of my posts have been about higher education. For us it is a top economic development priority. This is a long standing belief of ours. In a world where the defining characteristic of prosperous places increasingly is human capital we believe that the  the single most important thing policy makers can do for the future economic success of Michigan and its regions is to ensure the long-term success of a vibrant and agile higher education system. We wrote that in 2006 in our  A New Agenda for a New Michigan report.

We believe the ideas laid out in the report are just as relevant today as five years ago. Because we think our higher education institutions – particularly public community colleges and universities – are so critical to the state’s future prosperity we developed our ideas starting with a clean sheet. We went well beyond merely debating how much money we should put into the current funding system. We came up with a belief both in the need to reverse years of declining investment in higher education but also in new ways to invest in higher education going forward.

Here are the highlights taken from the report:

“… the single most important thing policy makers can do for the future economic success of Michigan and its regions is to ensure the long-term success of a vibrant and agile higher education system. Unfortunately, after decades of building a world-class higher education system, Michigan has been under- investing in our universities and community colleges for years. To make matters worse, policy makers have combined funding cuts with jaw-boning to get public higher education institutions to limit tuition increases, thus restricting the two main sources of revenue needed to insure their continued quality.

Despite a state constitutional guarantee of autonomy, there also has been an uptick in policy makers’ interest in micro-managing public higher education institutions. A variety of state policy makers have tried to influence admission policies, curriculum, facilities funding, personnel policies, etc.

All of this threatens the quality of arguably Michigan’s most important economic asset in a knowledge economy. What we need from policy—and are not getting—is a commitment to insure a system of higher education that is world-class in (1) preparing students for success in a flat world, and (2) contributing to new knowledge creation.

We need a new approach to state support for higher education, one that will give us a better chance of maintaining a high-quality and agile system of higher education for decades to come. We propose a new structure for state support of higher education. It would have three components:

Institutional independence at public universities and community colleges.
Each of our public community colleges and universities has a public governing body to represent the best interests of citizens. Beyond that, in a highly competitive industry, markets and competition are the best way to set prices and to insure long-term quality. This means, most important, giving public higher education institutions autonomy over:
• Setting tuition. The quality of the education and the strength of the institutions in the long term are more important than the price of attending.
• Recruiting students. Universities should be free (in fact, encouraged) to recruit the most talented students from anywhere on the planet.
• Programs, curriculum, and pedagogy
• Facilities

Provide state funding to students, no matter where they come from, rather than to institutions.
With autonomy, institutions will control their revenue based on their ability to compete in the marketplace. The state’s role should be to make higher education more affordable to students. We believe this is a terrific—probably the best—investment for the future economic success of the state. So, the higher proportion of tuition paid by the state, we believe the better for the state’s future. The reality is, given the state’s chronic structural deficit, there is almost no chance of a substantial increase in higher education funding without a tax increase.

We recommend a single fund that would take the place of all state funding for higher education (including merit scholarships and capital outlays) and would provide students with a voucher/foundation grant. Moving to a system of supporting students rather than institutions raises some big policy issues:

Which students? Our preference is all students: undergraduate and graduate; in-state, national, or international; and from all ages, right out of high school to mid-career. Public funds would be used to help students from anywhere on the planet who can meet entrance requirements to better afford Michigan’s higher education system. This might be the most powerful statement we can make that we want the most talented people in the world to come here to learn and ultimately live and work.

Which institutions? Certainly all public community colleges and universities. Our preference is also to include, maybe at a lower rate, campus-based private universities and colleges with a preponderance of full-time students pursuing four-year or graduate degrees.

Grants or loans? What matters most to Michigan’s economic future is not where you grew up but where you choose to live and work after college. So our preference is to make more of the state support as loans to students, which become grants if they stay and work in Michigan for a relatively short time (3–5 years) after college.

Provide a substantial state match for federal research funding.
Create a second, smaller but still substantial, pool of funds that would provide a match (goal of 20%) for federal research funds. Universities could use funds either to provide a match to win grants or to invest in additional research or research facilities. Matching funds should be awarded to nonprofit research institutions that win federal research grants as well.

Research universities may be the most important assets Michigan has in creating a vibrant knowledge- driven economy. We can’t emphasize enough, in a knowledge economy, the strategic importance of our major research universities. Communities across the globe, recognizing the importance of research universities, are trying to replicate what we already have here. One can make a strong case that the most productive state and local economic growth policies over the past several decades have been public investments in research universities in Austin, San Diego, and North Carolina’s Research Triangle. The payoff in each case has been huge.

And yet for some reason, even though we have one of the great research universities in the world and two others that rank in the top 100 nationally, Michigan policy makers have never viewed major research universities as a key economic resource. This needs to change! These universities are, in and of themselves (even if there are no spin-off jobs), major export-based enterprises. In total, Michigan universities bring in more than $1 billion annually in federal funds and employ thousands of knowledge workers. In addition, they are major retainers and attractors of talent from around the world. And, although there are no guarantees, places where new knowledge is being created have a big edge in being the places where new technologies are commercialized.”

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