Higher Education Going Lower in State Budget

Guest Post By Lew McMurran of the WTIA

Higher education is at a major crossroad in Washington.  The state’s colleges and universities are being squeezed financially in the state budget, have few good options to fund themselves, are overenrolled, are turning away qualified students, and cannot offer the same level of financial aid as in the past.

Yet the need for people to obtain higher education is greater than it has ever been in order to have a decent shot at career and job opportunities.  The facts about the value of higher education are well known:  higher average salaries for bachelor’s degree holders or higher, lower unemployment rates for college graduates, less use of public services, such as criminal justice, public health and social service programs.

With the slow economy not yet producing growth in tax revenue, the prospects for the state’s higher education budget are bleak when state legislators convene in January (or possibly before).  Currently the state funded portion of the operating budget for higher education stands at $2.9 billion for the 2009-11 biennium that ends June 30, 2011, representing 9.5% of the state funded operating budget.  (The actual budget is higher when counting federal funds received by higher education institutions.)  In comparison, K-12 schools make up 42.7% and human/social services represent 36.5% of the state operating budget.

In terms of employment, higher education is the largest employer of state employees at over 45,000 FTEs across the colleges and universities.  In terms of students, as of fall 2008 (most recent figures available), there were 266,703 students enrolled at the 34 community and technical colleges across the state, 92,379 undergraduates at the two research and four regional universities and 18,693 enrolled as graduate students.  There were also 48,949 students enrolled at the state’s private colleges and universities.

Beyond just being places where students earn degrees, higher education, especially the state’s two research institutions, is a major economic driver.  UW’s well known ability to garner federal research funds of over $1 billion annually has a enormously beneficial economic influence on the region.  The technology, ideas and companies that are spun out of UW and WSU based research creates jobs and prosperity for Washington.  But we are slowly killing the goose that lays golden eggs by limiting how much the goose can eat.  In other words, the constant budget pressure that the colleges and universities are under is going to eventually hurt the quality and reputation of Washington’s higher education system.

It is well documented that the number one factor for a thriving technology based economy is a well funded and well regarded research university.  In every other major tech region of the US, at the heart is a top notch research university.  In other major technology hubs like Boston, Research Triangle, NC or SF/Silicon Valley, there are often both public and private research universities at their cores.  Since Seattle does not have an MIT or Stanford (sorry Seattle U. and SPU), we must rely on UW to be that anchor.  This means maintaining quality to remain being ranked as one of the top public universities in the U.S.  Quality does not come cheaply.

There is the question of access and participation.  These are the supply and demand of higher education.  Washington does an excellent job of making higher education accessible in some form.  The state routinely ranks in the top five states for community college participation rates.  Community and technical colleges are spread out across the state so that citizens can find one relatively close by.  Community and  technical colleges are inexpensive.  Many have partnered with a four year institution so that a limited number of bachelor’s degrees can be conferred on CTC campuses.  The branch campuses of WSU and UW also provide access to upper division courses outside of the main campus locations of Pullman and Seattle, respectively.

But Washington’s participation rate for four year schools ranks among the lowest of the states–38th for undergraduates and 42nd for graduate student participation.  Of course it does no good to push more people toward attending four year schools if there are no spots for them.

As resources become even dearer, how will the state’s colleges, universities, legislators and citizens respond?  Students (and their parents) will likely balk at tuition increases, even as the state’s schools still remain a very good deal compared to other states’ public universities.  Will universities end degree programs with limited interest by students?  Will the state cut off financial aid for sixth year university students?  How will we graduate an adequate number of students in STEM fields that are so critical to the local technology community?

Governor Gregoire convened a higher education task force to examine these questions that was chaired by Brad Smith of Microsoft.  The task force’s initial recommendations, yet to be finalized, are to increase overall bachelor degree granting capacity by 6000 by 2018.  Tuition setting authority for in-state undergrads is on the table.  The four year schools will have more accountability for hitting degree targets, types of degrees, transfer rates, retention rates and other measurable outcomes.  Various efficiencies, such as system wide purchasing as one example will be implemented.

What the task force did not do is opine on funding scenarios.  The bottom line is that the colleges and universities simply hope to maintain their current levels of funding, which are arguably inadequate already.  The November election made it obvious that voters are not interested in higher taxes and the incessant crowing from government institutions about their lack of money.  Even if those complaints are justified, the state’s colleges and universities are going to have to be creative in how they deliver higher education.  There has even been talk of reforming tenure for college professors–from people in higher education.  You know times have changed when ideas like that are put on the table.

For the tech sector, our job is to ensure that our policymakers know how important and valuable higher education, especially STEM degrees, are to our state economy.  Today’s winning economic regions are based upon the attraction and development of talent.  We attract great talent but we are falling down on the development of talent from our own state.  Washington’s future depends on a well educated citizenry.  This must be our primary public policy goal.

Thanks to Lewis A. McMurran of Washington Technology Industry Association for the above contribution.

About Joe Wallin

Joe Wallin focuses on emerging, high growth, and startup companies. Joe frequently represents companies in angel and venture financings, mergers and acquisitions, and other significant business transactions. Joe also represents investors in U.S. businesses, and provides general counsel services for companies from startup to post-public.
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