U-M Provost Teresa Sullivan: The Value and Funding of Public Higher Education

April 14, 2010

Text of Provost Sullivan’s address to the Wolverine Caucus

Good afternoon and thank you Veronica. I’m pleased to be here today and welcome the opportunity to talk with you about higher education. In the last few years, discussion of public higher education has focused on its value and how it is financed. I want to address each of these today and look forward to your questions and a general conversation when I finish my formal remarks.

In an era of economic uncertainty, here in Michigan and across the country, the value or value added by higher education has received a good deal of press attention. The public phrasing of the issue is along these lines: Do the benefits an individual gains from an undergraduate degree outweigh the costs of obtaining it?

This is a question worth considering. Evidence tells us that the answer is “yes”; the financial returns make it worthwhile to obtain a college degree. Information from the Bureau of the Census indicates that someone with a college degree will earn about $1 million more over his or her lifetime than someone who does not attend college. That’s enough to make quite a difference in one’s life, so clearly it is a good investment on an individual level. If one looks at it from a societal perspective, it is also worthwhile. The taxes paid on that additional $1 million are of value to the state and the nation.

Considering the value question requires us to go beyond the economic costs and benefits of a college degree. In considering our investment in higher education, it is important to think more expansively about the role it plays in the lives of individuals and in the civic, social, and cultural life of the state and the country.

Let me focus on the range of benefits a college degree brings to an individual and to society. In addition to the economic payoffs over a lifetime, there are several other benefits. Decades of research by sociologists, psychologists, and educators indicates that higher education leads to greater civic engagement, increased openness to ideas, and greater participation in cultural activities.

Studies of nationally representative groups of college students show changes toward a greater sense of civic responsibility and social conscience among these students during their college years and continuing thereafter. Young people with college degrees show a greater interest in and involvement with the political process than individuals who have not attended college. They are more likely to follow public policy debates, to be engaged in political campaigns, and to vote. These are behaviors we value in a democratic society and our investment in higher education helps to support them.

Another important benefit of higher education is the development of greater abilities in abstract reasoning, critical thinking, and grappling with intellectual complexity. All of these qualities help to make an individual more adaptive to changing environments. This is a set of qualities colleges and universities seek to develop in their students and it is good to have evidence that this occurs.

These abilities are critical in the 21st Century. In the economic realm, globalization and technological change push individuals and organizations to act smartly and swiftly to remain competitive. The skills developed through a college education contribute significantly to an individual’s ability to contribute to and succeed in the world today.

There are significant benefits to society as individuals develop these critical thinking skills. Many of you maybe familiar with the work of Richard Florida, the futurist and author of books on what he calls the “creative class”. Florida’s work examines the growing importance of knowledge and creativity in economic growth. He argues that in the past, factories located near natural resources essential to whatever they produced. Areas that had coal or copper or whatever was needed did well.

Florida suggests that today the source of competitive advantage is human capital, the educated and creative people who develop new ideas, new technologies, new kinds of organizations and ways of doing business. He has documented the tendency of people in this “creative class” to locate where there are others who share their interests. Success in their work depends on being in proximity to others who are similarly inclined, providing opportunities for the cross-fertilization of ideas. Universities and colleges have long been home to creative people, both students and faculty, and their presence can help to draw others to a region.

There are two critical points here. The first is that the individuals who will shape the future will be those who have the experience of higher education and thus the talents to work effectively in the new economy. Equally important, with their resident faculties colleges and universities help to provide the critical mass needed for innovative economic activity. Our society gets a double benefit when we invest in higher education.

Let me turn now to consider a slightly different effect of higher education, and this too has individual and social benefits. Research has found that individuals with a college education spend more time and money on cultural activities. This contributes to a higher quality of life for the individuals, both adults and their children. It may also translate into increased support for the arts generally. And this nurtures the development of the creative communities Richard Florida examines.

It is worth noting that these individuals also devote more time to developmental activities with their children. Evidence suggests that parents, particularly mothers, who are well educated are more likely to engage in reading and other learning activities with their children than are parents who have not attended college. This benefits the children, of course, and it also benefits society when they begin school ready to learn.

Shifting gears slightly, I want to look at another social benefit of higher education. Today’s economy demands creativity and agility. The companies that are successful – like Google to name a big one, or Nexgen Sciences a small biotech firm in Ann Arbor – are those that are entrepreneurial. They seek new ways to do things and hire employees who are imaginative and adapt easily to change. The workforce they seek is college educated, with the skills I’ve mentioned in thinking critically and grappling with complexity. For the U.S. and for Michigan to be competitive in the international economy, we must have that kind of a work force.

Michigan’s growing biotech sector bears this out. Firms in southeast Michigan are adding employees with expertise in fields like bioinformatics, computer science, and nanotechnology. They also seek employees who have worked in diverse, multicultural teams and settings and have the ability to work across cultural divisions. Several biotech firms have developed in the Ann Arbor area in part because they can easily find the educated workers they need. In addition, they can tap into the intellectual resources of the University’s research enterprise. There is a strong symbiotic relationship that develops as students, faculty, and businesses come together. Indeed, this past month 9 of the 15 small firms reporting new hires in Ann Arbor were University of Michigan spinoffs or were started by student entrepreneurs.

In sum, the investment that states make in higher education pays dividends to individuals, the state, and the country as a whole. The next question to examine is how to pay for it.

Public discussion about higher education finance has often focused on what it costs a student to go to college today. Let me acknowledge that college is expensive and let me add a clarification. Nationally, public research universities have used about 92 percent of the tuition increases of the past decade to offset declines in revenue, predominantly decreased state support. A generation ago, state support to public universities generally covered 70 percent of the cost and the student paid 30 percent. Today this is reversed, with students paying closer to 70 percent and states covering about 30 percent of the cost. Decreasing state support has led to an increased financial responsibility for students and their families.

Public research universities educate 85 percent of undergraduate students and 70 percent of graduate students enrolled in all research universities. They are the leading source of individuals with doctoral degrees in key fields ranging from computer and information science to foreign languages, math, and physical sciences. Public colleges and universities lead the nation in educating students from underrepresented groups. These institutions play a critical role in our society and we must find ways to support them appropriately so that they can continue to do so.

Leaders in government and education have proposed new ideas for how public higher education might be financed to more effectively support its academic programs and the opportunities for access and social mobility that it offers. I want to outline a few of these ideas, not because they are final answers, but because they are starting points for an important national discussion of the policies we need to develop. It is likely that any new national policy will draw some on these ideas as well as others that will emerge as the debate moves forward.

State Support– Governor Arnold Schwarzenegger of California has proposed amending that state’s constitution to require that higher education receive no less than ten percent of the state spending while prisons receive no more than seven percent. What’s significant about Governor Schwarzenegger’s proposal is that it launches a discussion about priorities.

One of the policy ideas that grows out of Governor Schwarzenegger’s suggestion is that of a consistent level of state funding for higher education. The State Higher Education Executive Officers Association – SHEEO – reports that national data show declining state investment in higher education across the country from 200to 2005, followed by a modest increase in 2006 to 2008, relative to inflation and student demand. This came to an abrupt end with the advent of the recession. It has been softened a bit by the infusion of American Recovery and Reinvestment Act funds, but these are now ending. Any increase in state funding is likely to come slowly.

These recurring cycles of increasing and decreasing investment are hard on states and hard on universities. We need to think, together, about how short-term budget decisions fit with our long-term need to invest in education. I know that here in Lansing and in state capitals across the country, legislatures are wrestling with this issue in the face of declining revenues. As federal stimulus funds are used up, the discussion is more urgent and more difficult. Yet it is one we must have and we must broaden the conversation to include state and federal government, higher education institutions, businesses, families, and philanthropic organizations.

Federal Support for Research Universities – A number of academic leaders, including Mark Yudof, President of the University of California, have argued for federal support for the operating and infrastructure costs of research universities. There are a couple of interesting ideas here. The first is that the nation as whole benefits from the research done at these universities and so the nation should help to support it. A second and related idea is that the federal government offers support to students through Pell Grants and loan programs, offsetting the costs of education for families. There should be similar offsets for the costs of research and education that universities are incurring.

Mr. Yudof’s suggestions are quite detailed. He offers several pathways for getting federal funding to public research universities throughout the country. One idea is for funding to follow a “Race to the Top” model that would provide federal funds based on criteria such as consistent enrollment of Pell grant recipients. Another possibility is a “theater of competition” model, similar to something proposed by President Obama, that would reward creative efforts by the states to improve graduation rates or meet other objectives.

Aligning K-16 Education – The Association of Public and Land-Grant Universities (APLU) is examining questions of educational alignment, taking a comprehensive look at K-16 education to see if there are possibilities for streamlining or greater efficiencies that can lead to better education and free up funds for reallocation.

Each of these proposals contains ideas that merit discussion and that may be the basis for new policies for financing higher education. The final slide here lists resources that are helpful in exploring some of the financing proposals I’ve just mentioned.

National and state leadership will be required to move the nation forward in thinking about and ultimately supporting public higher education, The State of Michigan, with its long history of leadership in higher education, is well positioned to contribute to this important work.