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Michigan’s Government Showdown — or Shutdown?

Michigan’s colleges and universities, already down millions in deferred state payments, are facing an incredibly uncertain fiscal climate. As legislators in Lansing bicker over a $1.75 billion statewide deficit, the threat of a government shutdown starting on Monday looms.

And college leaders aren’t only looking forward with nervousness, they’re likewise looking anxiously back — to ensure the restoration of about $138.7 million included in last year’s appropriation for universities, and $25.8 million for community colleges, delayed because of the budget crunch until the start of the new fiscal year October 1.

“It’s so fluid right now,” says Gregory Rosine, senior vice president for university advancement and legislative affairs at Western Michigan University. The university expected to receive a mid-October payment of $11 million in deferred state funds, in addition to another $11 million or so from the upcoming year’s appropriation. Right now it’s unclear how big a check Western Michigan can expect next month, though it’s safe to say it’s probably in the $0 to $22 million range.

“We’re talking about $22 million – that’s a lot of money,” Rosine says. “We put a budget together on the assumption and set tuition on the assumption that we were going to have this deferred payment come back to us.”

“In order for us to go forward into the academic year, we would like to have a good idea of what our budget is going to be, what our appropriation from the state is going to be. And the longer that remains uncertain, clearly the more difficult it is to plan,” adds Steve Webster, vice president for governmental affairs at Michigan State University.

College officials say their institutions, which are able to collect tuition directly from students without a state intermediary, have no plans to immediately shut down in the event of a government shutdown (which, Webster says, he thinks is unlikely to happen). But even assuming lawmakers do agree on a budget — most likely at this point a short-term budget — bigger issues may still lurk in the background.

Democratic Gov. Jennifer M. Granholm’s recommended budget originally included a 2.5 percent increase in funds for higher education — but that increase was predicated on an increase in revenue. And with lawmakers unable to agree on tax increases — the two main proposals being to expand the sales tax base so that it includes some service industries, and to increase the income tax from 3.9 to 4.6 percent, the latter being the level before a series of tax cuts under recent Republican Gov. John Engler’s administration — it’s probably safe to say that college leaders aren’t counting on any funding increases, Rosine says.

The “best-case scenario,” says Michael Hansen, president of the Michigan Community College Association, is that the colleges “get their delayed payment restored and no increase this year.” Asked about his thoughts on the chance of a government shutdown, Hansen says that while “it’s not over ’til it’s over,” the tone of the discussions in Lansing is worrisome. “The sides are now bracing for a shutdown and trying to figure out who benefits politically from that,” Hansen says. “That’s the most disgusting thing I’ve ever heard, if the situation has devolved into who gains politically by a government shutdown.”

James J. Duderstadt, president emeritus and University Professor of Science and Engineering at the University of Michigan, says that he expects the legislature will come up with a solution before Monday — but only on paper and not in practice.

“Probably what they’re going to do is find some way to paper it over,” he says — with state leaders writing what looks like a balanced budget only to come back in another few months to announce cuts. “My belief, and it’s shared by a lot of people, is that what you’re seeing right now is the endgame of a bitter political battle which is very likely to lead to the same thing it’s led to in the last several years, which is just postponing the serious issues — like getting an adequate tax base.”

Duderstadt traces funding woes for Michigan higher education to the 1980s, when Japanese imports first posed serious threats to Detroit’s automobile industry and universities lost about a third of their state support. While appropriations bounced back a bit during the 1990s, when demand was high for American-made sports utility vehicles and equity markets were booming, tougher times and lower taxes have since combined to hurt public higher education, Duderstadt says.

Per-student higher education appropriations at Michigan’s public universities have fallen from $6,840 in 2000-1 — $8,154 when adjusted for inflation — to $5,852 in 2006-7, according to the Presidents Council for the State Universities of Michigan. And while the state ranks 26th in terms of per-student appropriations, again according to the Presidents Council data, Michigan was the fourth-slowest state in terms of increasing its higher education spending in the past decade.

Furthermore, Duderstadt says, “We have not had, in Michigan higher education, a significant capital outlay bill since 1995, for over a decade now.”

But Erik Guenard, dean of business services at Gogebic Community College, in Michigan’s Upper Peninsula, says he sees in the state’s pro- economic development attitude reason for optimism — and he expects Gogebic to get its $700,000 in deferred appropriations back in any budget breakthrough. “I do feel pretty good about it because the state right now has been talking about turning the economy around and the only way to turn the economy around is through education of the citizens,” Guenard says.

“We want to be seen as a state that is on the move, that is using three research universities to fuel the economic engine,” says Terry Denbow, vice president for university relations at Michigan State. “We are concerned about the image and reputation of an entire state.”

“The bottom line is that Michigan is calling a timeout that it doesn’t have — and there’s always a penalty for calling a timeout that you don’t have.”

Elizabeth Redden

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Comments

Michigan’s elected officials are an absolute disgrace. They have turned this state into a laughingstock, and have wrecked, not only the public colleges and universities, but many other public services as well. Some of them have the gall to blame Michigan’s budget problems on the wages and benefits given to public servants, even though those servants have received little in the way of pay raises in the last few years, and have seen their benefits cut back. The colleges and universities are no longer trimming fat—they are cutting flesh and bone, cutting off fingers and toes. All of these idiots should be recalled.

Steve, Western Michigan University, at 8:25 am EDT on September 28, 2007

Show us the results

” .. like getting an adequate tax base.”

The writer is well-known for his advocacy of public higher education and financial pressures brought about by Medicaid and Medicare.

http://www.senate.gov/~finance/he.../testimony/2005test/120506jdtest.pdf

However, it is one thing to be at a Public Ivy.

It is quite another to be at Average Public College, the high-cost questionable marketing involved by those colleges, and the outcomes.

http://online.wsj.com/article/SB1...5602.html?mod=rss_most_emailed_month

Michigan has lost more than a million high-paying industrial jobs in the last 20 years. Jobs that many in academia seem to enjoy sneering at.

Yet, higher education behaves like nothing has changed. Declining enrollments? Rising demands for relevance? Low GRE scores? Wha?

Well — the world has changed. Either change with it — or get rolled over.

B.D., at 8:35 am EDT on September 28, 2007

Wake Up Michiganders

I grew up in MI, now working in CA because there are no jobs in MI, bought a place to spend time there with my family, taxes are triple what I pay in CA...doesn’t make sense since property values keep going down in most areas. My taxes have increased every year for every reason, uncapping, denied homestead due to spending time working in CA, they call it “market adjustment” but values are going down. No one seems to understand they are killing the goose that lays the golden eggs. I read they are letting Canada dump toxic waste in MI for a few dollars, what kind of planning, what kind of future is there for my home state? For sale signs everywhere, I read a third of the people can’t pay their property taxes, someone needs to wake up and grab the steering wheel!

Michele Titus, teacher, at 10:10 am EDT on September 28, 2007

Plenty of fat to trim

A commenter wrote...."The colleges and universities are no longer trimming fat—they are cutting flesh and bone, cutting off fingers and toes.”

This has not been my experience at any of the state universities where I have worked. When financial times get tough schools need to look at the non-teaching areas of their universities and start cutting. How much money is wasted on bringing in expensive speakers for which faculty must offer “extra credit” to get students to attend?

How much money and time is wasted on forcing employees to attend diversity seminars and paying salaries to “diversity coordinators” and “diversity consultants"?

Laura, at 11:00 am EDT on September 28, 2007

On Being More Than A Little Pissed Off

I have lived 20 of the past 25 years in Southeast Michigan. I was on the faculty of the B-school at the University of Michigan (Ann Arbor) for a short time, started a small business that created and delivered instructional programs in the so-called quality sciences for the automobile industry, and walked away when (1) the former Big Three, recognizing that the Japanese were eating their lunch and having absolutely no idea how to respond, were doing nothing more than grasping at straws in hopes that something – anything — would work and (2) when it became quite impossible for me to sit in a roomful of vice presidents and managers at Ford without telling them precisely what I really thought.

First, I personally believe the caliber of individuals in government in Michigan – Detroit excepted – is just about as good as those representing the other forty-nine. I was no fan of John Engler, but I do believe Michigan has had fairly decent governors over the years.

My anger, however, is directed at (1) the upper-level management of the U.S. automobile industry and (2) the business schools of the major state universities.

There is not enough space here to develop my theme, but Michael Moore – I mean a guy with a lower-middle class background in Flint, no remarkable education or training, and no experience in the media, made a complete ass of Roger Smith, simply because the latter was border-line incompetent and incapable of defending his company’s business decisions and actions. That was almost 20 years ago — when the industry had already been in serious decline for more than fifteen years — and GM’s leadership in the interim, even with a significant post-Smith makeover, has been mediocre at best.

At Ford after Henry II, there were a few years of about average leadership followed by Alex Trotman, Jacques Nasser, and young Billy Ford. Whew! I conducted quite a bit of training at Ford’s Sheldon Road plant when Billy was cutting his managerial teeth there, and if there was anyone on the scene who had the slightest notion that he was either presidential or CEO material, I never met that person.

Both GM and Ford – and I won’t even go close to the Chrysler–Mercedes-Benz debacle – have been characterized by less than mediocre management for much longer than two decades.

I will own up to the fact that there are tiny pockets of uncoordinated support for the American automobile industry at the state’s business schools, but the University of Michigan (Ann Arbor) gives every appearance of acting as though demonstrating an unusual interest in the State’s economy would besmirch its reputation as an internationally important school. Why the State of Michigan has not forced a consortium of the business schools of Michigan State, Eastern Michigan University, Oakland University, Western Michigan University, and Central Michigan University to address, not just the problems, but state of the art management theories and practices of manufacturing and assembly companies is completely beyond me. But you can be certain that currently the combined influence of those universities on the health of the American automobile industry would barely fill a thimble. You could shut down those business schools tomorrow, reallocate the funds to the State’s community colleges and the Michigan economy would not suffer.

Please don’t misunderstand, Michigan’s manufacturing and assembly corporations have many, many competent employees (the University of Michigan (Dearborn), for example, produces a large number of first-rate engineers, most of whom go right to work for the automobile industry). But the vast majority of the State’s citizens who work in the automobile industry work in business and organizational cultures that have been broken for a very long time. The business “leaders” blame it on everything – government leadership, outsourcing, free trade agreements, illegal aliens, product dumping by foreign firms ... you name it — anything and everything but themselves. But these corporations have organizational cultures that are so non-optimal ... so dysfunctional ... so poorly managed it’s an embarrassment to us all. And it has reached its current level of ineptness in no small part because of the state’s business schools.

Frizbane Manley, at 11:50 am EDT on September 28, 2007

“Yet, higher education behaves like nothing has changed. Declining enrollments? Rising demands for relevance? Low GRE scores? Wha?”

how do you know that higher education is behaving like nothing has changed? because you want to believe it?

i can tell you for a fact that our enrollments are not declining at my university. we’ve been steadily growing and our average GPA for incoming freshmen is now over 3.5 this year. i think that’s pretty incredible for a public institution of 23,000+ and for the university that is amongst the lowest funded in Michigan.

our institution has been making drastic cuts across the board. we have cut a program that had limited enrollment, yet was one of the only options in the state for this program; we have cut benefits that faculty and staff receive; our health care costs have risen; and, tuition has been raised, unfortunately. faculty workload decisions are being made that are a step backwards. decisions are being made based on money instead of the soundness of the pedagogy and this is causing me to seriously consider moving to a new university in another state.

sean, professor at grand valley state university, at 1:00 pm EDT on September 28, 2007

budget crisis

Honestly, I have to say that this situation is completely rediculous. Students pay through the nose to go to school, and while it is a very worth while investment, cutting funding to schools and raising our tuition is not the way to get the educated to stay in a state, This is a crucial bigger picture mistake that Michigan is making right now. While psychotic, bickering polititians argue about raising taxes a couple of percentage points, us kids persuing higher education are busy figuring out how in the world to get out of this state. It seems to me that if the state is investing in state universities by funding per student, it is investing in the minds of tomorrows leaders to make Michigan a better place to live. Thanks for that miniscule investment. We will return the favor in kind by moving away to a place where we can make enough money. I believe in economics, that is called a leakage. Invest in us. Raise taxes a little. Yes..It will affect us all. Mostly it will affect people who can afford it without too much chaffing. Suck it up fat cats! Students simply cannot afford to take the cost of 1 percent tax increases on the chins. And you cannot afford the consequenses if this states best and brightest up and leave on graduation day.

Maggie Reed, student at Grand Valley State University, at 4:45 pm EDT on September 28, 2007

Knowledge

” .. how do you know that higher education is behaving like nothing has changed?”

Are all Michigan public colleges enjoying higher enrollments? (No)

Are all Michigan counties enjoying economic growth? (No — Michigan has the worst economic performance in the U.S.)

Does Michigan have the same number of public colleges in 2007, as in 1987? (Yes)

What’s changed? (Nothing)

Buzz, at 7:30 pm EDT on September 28, 2007

Point of order

” .. Michael Moore – I mean a guy with a lower-middle class background in Flint, no remarkable education or training, and no experience in the media, made a complete ass of Roger Smith ..”

Fact 1: Mr. Moore conveniently forgets to mention that both his parents worked for General (Generous) Motors — he was very close to being upper-middle-class.

http://en.wikipedia.org/wiki/Michael_moore

Fact 2: After high school graduation, he was elected to his hometown SUBURBAN Flint (Davison) school board. Not a small deal.

Fact 3: He started up a statewide newspaper and was editor of “Mother Jones.” Not a small deal.

In other words — Mr. Moore is a first-class BS artist. He should be teaching Victim Studies at a Rocky Mountain university.

Buzz, at 9:30 pm EDT on September 28, 2007

Redmond, Washington In 2040

I wrote the following letter to my son at the beginning of his junior year at the University of Michigan. Since then Pfizer has closed three “high tech” facilities (in Ann Arbor, Plymouth, and Kalamazoo), eliminating 2,410 jobs at their facilities and causing the loss of an additional 3,723 spin-off jobs at the company’s suppliers in Michigan.

October 19, 2005

Dear ●●●●:

The next time you’re inclined to wonder what you’ll be doing after you get your a degree in Electrical Engineering and Computer Science, please contemplate what you won’t be doing. You won’t be graduating with honors and taking a job with one of the former Big Three ... GM, Ford, and (Daimler) Chrysler. When I was a young man forty years ago, having an opportunity like that was like having a free ride to prosperity and, if you played your cards right, an opportunity to live an interesting and meaningful life as well.

But Chrysler has been purchased by Daimler-Benz – although they called it a merger – and Ford and GM have resorted to selling a great many of their products at a small margin above cost, just to move inventories of vehicles very few customers want. Both companies are cutting back their workforces as quickly as the United Auto Workers will let them, and the values of their stock and their Standard & Poor’s debt ratings are declining to levels that are ... well, very disconcerting. And the UAW is now forced to sign off on practically any “restructuring” proposal the industry puts before it ... not unlike the last-gasp “negotiations” of the airline industry unions during the past five years.

I don’t think GM and Ford are on the verge of bankruptcy, but it would not surprise me to see both eagerly pursuing Daimler-Chrysler-like “mergers” with Toyota, Honda, and other fairly well managed automobile manufacturers. Of course UAW membership continues to decline, both in raw numbers and, more dramatically, as a percentage of auto workers in the United States. Neither the industry nor the union is in an enviable position for negotiation.

If, today, you were an automobile worker employed by either GM or Ford, you would be shaking in your boots insofar as the company’s health care benefits and retirement packages are concerned. If. next week, you were a newly employed assembly line worker at either company – not that they’ll be doing any hiring – you could forget about those benefits. They won’t be there. And it won’t be much better for electrical engineers or computer scientists. Oh, did I mention that you’ll be living in a country in which a conservative political agenda will strongly influence public policy throughout most of your lifetime ... and you’ll be living in a state that will attempt to attract industry by compromising the tax base that is necessary to provide virtually all societal benefits, including education. In other words, you’d be well advised not to count on your government for provision of a comprehensive health care program for all citizens (or even for low-income citizens), and don’t be surprised if you have another President like George W. Bush who wants to privatize social security as well. In short, you should not count on capitalism and private enterprise to ensure your long-term well-being ... and especially when you’re old enough to prop your feet up on the ottoman, think about all of those trout in the Green River that are eager to chomp down on a May fly, and wonder if your grandchildren would like to hear your animated reading of Harry Potter and Ogres of Wharton.

This system worked well enough for those of my generation, but, if I were you, I would not count on the long-term viability of companies like Microsoft or IBM or Hewlett-Packard or even Google thirty years from now. Hmmm ... and where are those ‘can’t-miss’ companies like Gateway and Compaq even as we speak? Oh sure, they’re still around ... but for how long? ... how viable are they?

I know, I know ... I can already hear you muttering, “Hey Dad ... it’s the computer industry and computers will be right there in the thick of things forever.” Right ... and that’s precisely what millions of automobile industry employees were saying about cars between 1915 and 1990.

In truth, there are lots of reasons for this sorry state of affairs in American industry, and if you query the CEOs, presidents and senior vice presidents, they’ll provide you with a substantial list of explanations (supported by a mind-numbing collection of graphs of correlated statistics) of the external factors (outsourcing, globalization, cheap labor in third-world countries, installation of fiber-optic cable and growth of the Internet, etc.) that caused this unfortunate state of affairs. In the process of losing our manufacturing and assembly industries, we’ve become a nest of finance dorks, making money by moving money around ... and that’s a worrisome prospect.

I don’t want to trivialize a very complex situation — and don’t get me off on what GM and Ford did to both the quality of their vehicles and the well-being of their employees by spinning off Delphi and Visteon – but here’s my ‘in-a-nutshell’ explanation:

“GM, Ford, and Chrysler are hurting > Because they can’t sell vehicles at a profit > Because the vehicles are (1) poorly designed, (2) of mediocre quality, and (3) more often than not inconsistent with what customers want (or need) > Because the companies are poorly managed.”

Believe me, that explanation works for many more companies than those in the automobile industry ... and I have left off the critical last arrow.

The standard response to business decline is to blame our problems on a multitude of symptoms – i.e., on someone else — but when it comes right down to it, when we burrow down to the root cause, it’s inept management.

So, dear son, I’m very strongly recommending that you never, ever put yourself in a position of having to count on the competence (not to mention the social conscience or ethical standards) of managers trained in American business schools. It’s not that the individuals (the BBAs and the MBAs) are either incompetent or unethical to begin with. It’s just that, when it comes to theories of business management (i.e., what you would wish to call a management paradigm), Gertrude Stein’s famous remark fits: ‘there is no there there.’ So-called ‘management science’ – and isn’t that an oxymoron? — is simply ‘the fad of the year’ followed five years later by the next ‘fad of the year,’ ad infinitum. So after n ≤ 5 years of business school followed by m ≤ 5 years of business practice – and especially at companies like GM, Ford, and Chrysler — these talented, energetic, and ambitious young people find themselves embedded in organizational cultures so mediocre (even dysfunctional) they never recover. They learn to go with the flow.

As undergraduates and MBA students they take their required courses in ‘business ethics’ – whatever you do, don’t outsource those courses to the philosophy department – but the actual content of their core management courses evolves in a manner that has absolutely nothing to do with science or the scientific method or even good business practice. It is – and please forgive me Son – horse shit at it’s best.

Of course the business schools know what they’re doing ... or at least the small number who have more than a few faculty with successful business experience know (and I’m not talking about the Jack Welsh types). Some B-schools even have concentrations for ‘turnaround specialists.’ Think about it ... training turnaround specialists is like saying, ‘Okay, we really screwed up ... but trust us, you can hire someone else we’ve trained to repair the damage the first guy created ... and, oh yes, it won’t cost YOU a dime ... your employees will gladly bear the brut of the turnaround by taking salary cuts (in real dollars) and giving up their benefits (including healthcare, which won’t be provided by their government, and retirement, which, if conservative legislators have their way, will be privatized and will not be affordable for most of them). And by the way, be sure to give your CEO an enormous raise ... how else can you expect to attract and retain such a well-trained, remarkably talented ‘leader?’’

So, dear Son, the next time you see Michael Moore using Flint, Michigan as the backdrop for one of his documentaries, pay special attention. You may well be catching a glimpse of what Redmond, Washington will look like in 2040.

Dad

RWH, at 12:30 pm EDT on September 29, 2007

Nomads?

Many aboriginal peoples were nomadic, right? Move with the herds or with the seasons.

Big house at Gross Pointe makes a nomadic life pretty difficult if not impossible. Have we modern day humans been too smug & too successful at tempting Mother Nature for too long?

Maybe we’re also too confident of our economic and political theories? Seems like we are holding onto them like Europeans were in the 1920s and 1930s — then exporting war became the only profitable business.

Does history repeat itself?

Dr. F. Gump, at 1:15 pm EDT on September 29, 2007

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