Microsoft Pledges $25M to New Scholarship Fund

Today, Washington State Gov. Chris Gregoire signed important legislation creating the new public-private Washington Opportunity Scholarship, an innovative approach to attracting new funding to help stabilize our higher education system and increase the number of Washington students earning bachelor’s degrees.

To help launch this new program, Microsoft and The Boeing Co. are pledging $25 million apiece over the next five years to the effort. Together with matching state contributions under the new program, this will raise $100 million for scholarships for low- and middle-income students. It’s an important first step towards the goal of creating a billion-dollar endowment for financial aid by the end of this decade.

Last year, I had the opportunity to work with a number of public and business leaders when I chaired the Governor’s Higher Education Funding Task Force. This work reinforced a key fact that many of us already knew: With state resources extremely limited, we need to attract more money into the higher education system to increase opportunities for students to develop the skills they’ll need to compete in the global economy. This is a pressing need not only in this state, but nationally as well. Across the country, there is a growing appreciation that our public colleges and universities increasingly are facing a funding crisis.

Historically, the higher education system for public colleges and universities has relied on two sources of money – direct state funding and student tuition bills. A two-legged stool is never sturdy, and that’s the problem for public higher education funding. As the recession and subsequent historic declines in state revenues eroded direct state financial support for our public universities, rising tuition levels have become inescapable. Indeed, the Higher Education Funding Task Force recommended that the Washington legislature give our six four-year public institutions more flexibility to set their own tuition levels, and today Gov. Gregoire signed into law a key provision that enables this step.

However, even sizable tuition increases can’t make up for all the cuts in public funding. Potentially even more disconcerting, higher tuition rates put at risk the ability of talented students from low- and middle-income groups to go to college. All of this comes at a time when the state needs to produce more college graduates in high-demand fields to enable local companies to fill jobs and help bring down the unemployment rate.

This combination of necessities has led to the new and innovative steps signed into law today. In short, we need to create a third leg to the stool for funding public higher education. This leg consists of a new endowment for financial aid for local low- and middle-income students who want to attend a college or university in our state. It is based on support from a new partnership between the public and private sectors. As an endowment, it starts to provide the financial sustainability that our current funding system so clearly is missing.

The bill signed into law today creates two new scholarship funds. The first will begin this December to provide scholarships to state students who intend to pursue bachelor’s degrees at colleges and universities in Washington. The second will build a long-term endowment whose earnings would provide an ongoing source of financial aid, now and for generations to come. Private contributions to these funds will be matched by state appropriations, with the precise timing of the state’s payments based in part on the recovery of the state’s financial circumstances.

Today’s legislation includes additional, innovative features designed to make it a success. First, the private contributions will be placed in 501c-3 accounts. This both ensures that these donations will benefit from federal tax deductions and that future state legislatures can never divert these funds to some other use. Second, the legislation creates a specific formula that ensures that scholarship funds will not be released from the endowment account unless the state fulfills its matching obligations, continues to maintain its appropriations support for state need grants, and the state sustains progress in increasing per-student funding at the state’s public four-year institutions. These measures create important political incentives for future legislatures to avoid the temptation to cut back their own support for public education.

The law also broadens the reach of state financial aid. It provides eligibility for these new scholarships to students from families with incomes of up to 125 percent of the state median income. In addition to the scholarship funds themselves, it creates an opportunity for businesses to donate some or all of their state R&D tax credits to a new fund to expand public four-year degree programs in high-demand fields, including health care, science, technology, engineering and mathematics.

Today’s pledge by Microsoft – the largest the company has made in Washington State – is another example of our work to enhance educational opportunities for students of all ages. It’s a cause we support around the world, and not surprisingly, with additional vigor in the state in which we have our headquarters and 40,000 employees. In Washington State alone, our company has donated more than $35 million dollars over the past five years to early learning, K-12 and higher education programs. 

We recognize that the new Washington Opportunity Scholarship isn’t a complete answer for improving student access to higher education. Ultimately, we need to do even more to shore up state support for higher education in good times and bad. However, this is a critical step in maintaining and increasing access to quality educational opportunities for the students of our state. We’re optimistic that additional donations will follow from the examples set by Boeing and Microsoft today, and that additional innovations will emerge to help more students get the type of college education that will strengthen the state’s and the country’s economic competitiveness.

For more detail on this story, read this press release on the Microsoft News Center.

About the Author

General Counsel & Executive Vice President, Legal and Corporate Affairs, Microsoft

Brad Smith is Microsoft's General Counsel and Executive Vice President of Legal and Corporate Affairs. He leads the company's Department of Legal and Corporate Affairs (LCA), which has approximately 1,100 employees located in 55 countries. Mr. Smith is responsible for the company's legal work, its intellectual property portfolio and patent licensing business as well as its government affairs and philanthropic work. He also serves as Microsoft's corporate secretary and its chief compliance officer. Mr. Smith currently co-chairs the board of directors of Kids in Need of Defense (KIND) and is the chair-elect of the Leadership Council on Legal Diversity. In Washington state, Mr. Smith has served as chair of the Washington Roundtable, a leading Washington state-based business organization, and he has advanced several statewide education initiatives.