Higher Education Task Force Presents Funding Strategy to Gov. Gregoire

Posted by Brad Smith
Senior Vice President and General Counsel

This morning the Higher Education Funding Task Force presented its recommendations to Gov. Chris Gregoire.
The governor created the task force last spring and charged it with developing a long-range funding strategy to provide Washington state’s students with affordable higher education opportunities. She also asked the task force to recommend ways to improve accountability and performance in our public four-year higher education institutions.

I was privileged to chair this group. Its mission reflected an extension of Microsoft’s long-standing commitment to quality education at all levels. The statistics tell a clear story: Over the next decade, it’s expected that two-thirds of the job openings in Washington will require a college education.
However, Washington currently ranks in the bottom third of states when it comes to the production per capita of bachelor’s degrees. Washington’s economic future and job opportunities for the state’s young people, including the children of Microsoft employees, require that the state renew its historic commitment to higher education quality and expand college enrollment capacity.

The task force reaffirmed prior state initiatives that set ambitious goals for enabling more Washington kids to go to college. We concluded that by 2018 the state’s six public four-year universities need to grow the number of students graduating each year by 27 percent. In addition, when it comes to graduates with degrees in science, technology, engineering and math (the so-called STEM disciplines), we need to aim higher still. We need to grow the number of these graduates by roughly 40 percent.

The hard question is how to pay for this.
Over the past eight months, a group of 16 task force members worked to identify ways to solidify and improve funding for our state’s public four-year universities. Our group included individuals from across the business, education and governmental communities. We worked closely with the governor, who accepted our invitation to participate in each of our meetings. We consulted closely and met as a group with the presidents of the state’s six public, four-year universities. We also talked at length with state legislators.

Throughout this process, we viewed our mission as one of creating jobs and providing opportunities for the young people of our state.
After analysis and discussion, the task force settled on a limited number of direct and important recommendations (available at http://www.microsoft.com/about/corporatecitizenship/en-us/our-actions/in-the-community/washington-state/#Educationtab ), which are very much linked together to form a comprehensive approach. These recommendations fall into three categories:

First, the state should adopt a new financial formula that combines direct state budget support of higher education with increased tuition-setting authority for the public four-year universities. The state’s goal should be to raise over time total funding-per-student at Washington’s public four-year colleges and universities. The specific goal should be to reach the 60th percentile among each institution’s peers from the global challenge states – a group of states that Washington has identified as our top competition for good jobs.

Under the task force’s proposed formula, as long as the state legislature keeps funding at a minimum baseline, the universities would be empowered to raise tuition and help grow enrollment, up to funding-per-student that reaches the 60th percentile global challenge state level. If the state legislature increases its funding above the baseline, this could accelerate enrollment growth even faster and could help keep down tuition levels.
We believe that this formula provides the best vehicle for the investments needed to enhance educational quality and grow college enrollments. Today, the state’s public universities must rely on annual decisions by the legislature to determine both the state’s direct funding for them and to set their tuition levels. No business could make long-term investment commitments with the uncertainty involved in the present, annual funding system for the state’s public universities. While the public universities are not private businesses, they are substantial institutions that need to make sophisticated financial decisions in order to grow.

Second, the task force recommended that the state take an innovative and sustainable step to establish a new revenue source to provide financial aid for low- and middle-income college students.Especially if tuition levels rise over time, it will be essential for the state to take new steps that ensure a student’s opportunity to attend college is a function of commitment and hard work rather than the size of a family’s checkbook. To do this, the group recommended creation of a new Washington Pledge Scholarship Program. This program would provide scholarships to Washington residents attending public community colleges and universities in Washington. It might focus special attention on STEM education.
This program would be based on an endowment funded through new, private donations from individuals and businesses. It would be encouraged in part by a new state tax incentive to encourage companies in the state to donate to the endowment fund. The fund would be created as a private charity, which would enable individual donations to benefit from a federal charitable tax deduction and would ensure that the fund would always be used exclusively for student financial aid. Building on this formula, the group recommended that the state seek to grow this endowment to $1 billion by the end of the decade.

Finally, the task force recommended steps to strengthen accountability by the state’s public universities. Although the task force shared a high regard for the management of these institutions, it concluded that a key element of a new financial formula should include enhanced accountability measures. Therefore, the group recommended specific performance criteria, including degree production, based in part on the “Complete to Compete” initiative of the National Governors Association. We also recommended that the legislature create a small fund to reward those campuses that meet or exceed specific metrics in helping more students to graduate.

While one can consider each of the task force’s recommendations separately, they are, in fact, inextricably intertwined. Part and parcel of greater tuition flexibility for the universities is enhanced support for financial aid and increased accountability to the public. Every aspect of the state’s higher education system depends on the legislature to sustain funding commitments.

These recommendations were also informed by the state’s current budget difficulties. Washington, like most other states, currently suffers from extraordinary budget challenges. Some might suggest that this provides good reason to postpone long-term strategies and focus solely on getting through what clearly will be a difficult year. Yet the current budget challenges also demonstrate why a new and better long-term approach is needed, and in fact needed now.
If adopted, the task force’s recommendations will help make it possible for companies like Microsoft to find more local talent with the skills needed to fill open jobs. This will be true throughout most of the state’s vibrant economic sectors. This in turn will help encourage businesses in the state to create more jobs here.
More broadly, the task force’s recommendations will put in place the financial foundation needed to equip the next generation of the state’s residents for the decades ahead. As the world economy becomes more competitive, the jobs of the future will require more skills, not less. The state needs a higher education funding strategy that will equip our children with the know-how and opportunity they will need in order to succeed. The task force’s proposals offer a path designed to help realize their potential.

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