Guest Opinion: Make investment for education to draw business

Ask legislators about their No. 1 priority and you’ll hear a nearly unanimous response: economic
development, more jobs, and higher income levels for our citizens. The commonality of purpose in
this matter may be cause for encouragement in Montana-if our policy-makers will undertake an
objective assessment of how public policies can achieve economic goals.

By MARK SEMMENS
Montana University Regent

If they do, they cannot help but conclude that Montana’s colleges and universities are an essential
element of any development strategy. They cannot help but conclude that greater investments in the
Montana University System are strongly justified by favorable economic returns.

Market demand

The evidence supporting these positions is overwhelming in its clarity and consistency. Leading
economists, labor and income trends, and economic development studies all support the critical link
between post-secondary education and economic success. And states that have made the
appropriate investments in higher education are reaping rewards in the form of higher incomes and
stronger economies.

Why is that?

First and foremost, the market demands it. The Bureau of Labor Statistics forecasts that nearly half
of all new jobs created in the next decade will require post-secondary education. Moreover, the
difference in average annual income between a high school graduate and a four-year college graduate
is $18,000-and growing.

Second, state dollars allocated to post-secondary education are leveraged into substantially greater
in-state economic activity. This arises from federal and corporate research projects, the spending of
nonresident students and their families, federal financial aid, and other student expenditures. The
state’s $140 million annual investment in the Montana University System, for example, supports a
total annual budget exceeding $800 million.

Equally important, there are many other effects that accrue to the private sector from a quality
post-secondary education system. Agricultural operations benefit from research that leads to better
grain varieties and improved farming and ranching techniques. Businesses improve their productivity
through work force development and continuing education. Emerging growth companies license
university-developed technologies and make use of facilities, equipment and graduates. And citizens
use affordable education to increase their skills and earnings.

Finally, good companies with high-paying jobs look to start up, locate or expand in states with strong
colleges and universities.

Regional trends

The states around us have recognized the trends that are driving today’s economy and directed their
public expenditures accordingly. During the past 10 years, nine states identified by a legislative
subcommittee as our regional peers have, on average, increased their funding for higher education by
more than 50 percent while Montana’s support has stagnated. As a result, these states’ average
per-capita appropriations for post-secondary education are now nearly 60 percent above
Montana’s.

And their investments are paying off.

In 1990, the average per-capita income for the states around us was roughly $2,000 above
Montana’s; 10 years later the differential had grown to nearly $5,000. In fact, if the growth rate of
Montana’s total personal income during the ’90s merely kept pace with the average growth rate of
surrounding states, our total economic activity would today be $2 billion greater than it is.

Is the outperformance of nearby states solely attributable to their greater commitment to
post-secondary education? Of course not. But there is no question that it is a key contributing factor.

At a recent conference on regional development, Mike Leavitt, Republican governor of Utah,
commented on his significant support for higher education and the resulting economic success. "I’m a
fiscal conservative," he said, "but I recognize that to attract good companies and raise the living
standard of our citizens, we need to develop our human capital." Governor Leavitt is right. And he
demonstrates that sound public policies can and should transcend partisan politics.

I should be clear that the Montana University System must do its part as well. We must reach out
and build stronger working relationships with businesses, agricultural leaders, and policy-makers. We
must continue to achieve efficiencies in our operations while delivering a quality product. We must
show responsiveness to the evolving needs of our customers. And we must clearly demonstrate
accountability for the resources we’re provided.

We’re making progress in all of these areas, and pledge to work together with public and private
leaders to do more. Together we can, and together we must, move Montana forward.

As a student of Montana history, I’m well aware that Montana has a storied tradition of developing
our natural resources for economic gain. If we are to succeed in today’s economy, we must develop
our most important natural resource-our people.

Mark Semmens is a member of the Montana Board of Regents and an investment banker with
D. A. Davidson & Co. in Great Falls.