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While folks who hold election certificates did their best to sound like economists during a House debate on tax policy on April 30, a fellow who holds a Ph.D. in economics and spent three decades as an economics professor came to the State Capitol basement to put on a seminar for one lucky journalist.
To be fair: Furthering my economics education was not Devinder Malhotra's purpose. The new chancellor of Minnesota State Colleges and Universities had come with a briefing on the lame response the Legislature is making to his plea for enough additional state funds to avert program cuts and physical plant deterioration in his sprawling system.
But Malhotra was easily persuaded to comment on the ideas voiced on the House floor that afternoon. Tax cuts are needed to spur growth, the defenders of the Republican-designed tax bill were saying, echoing the supply-side theorists whose ideas held sway during the Reagan administration.
Do you agree? the student asked.
"Tax policy traditionally, both at the federal and the state levels around the nation, has really focused on subsidizing the price of capital. That is a great strategy in an industrial economy," Malhotra said, pronouncing the word "industrial" in a tone that connoted a time gone by.
"In today's knowledge-based economy," he continued, "you have to subsidize human capital and formation of human capital. Purely from that standpoint, additional investments [in higher education] are needed.
"The irony is, the knowledge-based economy is also changing so rapidly. As the whole movement of artificial intelligence and augmented reality and technology come into play, we will very soon move into the human economy. The basic issues of ethics, of teamwork, of critical thinking, all that will become more important because so much work now done by people will be done by machines." Thriving in the coming human economy will also require more of what higher education offers, he said.
The Minnesota State chancellor is too polite —and too politically astute — to speak aloud the conclusion his student drew: A lot of today's players at the State Capitol aren't thinking enough about changing economic times. If they were, they'd be doing a lot more this year for higher education.
To be sure, keeping up with accelerating economic change isn't easy. But through 160 years of statehood, that's been an unwritten but crucial part of every legislator's job description. Since pioneer days, Minnesotans have looked to state government to be their ally in the pursuit of prosperity, for their children if not themselves. State government has been the people's tool in building the infrastructure, educating the young people, ensuring the rule of law, preserving the environment, providing the talent-attracting amenities and otherwise setting the table for the future.
Legislators can't miss the fact that the need for more educated workers is becoming acute in this state. Only last week, the Minnesota Chamber of Commerce — a major force at the Capitol, especially when Republicans are in charge — launched a Center for Workforce Solutions, a first-of-its-kind venture whose components include efforts to help more students get more of the degrees and training certificates employers want to see on workers' résumés.
The 54-campus Minnesota State system is this state's leading provider of that kind of workforce preparation. It's also the provider most dependent on state appropriations, and most firmly under the Legislature's thumb when it comes to its other major source of revenue, tuition. Its status is akin to that of a state agency.
By comparison, the University of Minnesota has a constitutional guarantee of operational independence, and its selective admissions policy gives it more ability to keep enrollment steady. Minnesota State's two-year colleges are committed to open enrollment. That means those schools experience countercyclical enrollment waves, up during economic downturns, down when jobs are plentiful.
They adjust operations accordingly, Malhotra said. Minnesota State has seen an 8 percent enrollment decline since 2009 and has cut its personnel costs 7.3 percent in the same period.
In a static world with an ample supply of skilled workers, that much downsizing might be hailed as prudent management. In a state that needs more educated workers to meet the demands of the emerging economy, that trend is worrisome. Minnesota is eroding its capacity to raise the educational attainment of its adult population at precisely the wrong time.
I asked whether the Legislature made matters worse by holding tuition essentially flat at Minnesota State's two-year colleges over the past six years. Perhaps, the chancellor said — but even without the Legislature's constraints, the system likely would not have raised tuition much. Most Minnesota State students simply cannot afford to pay more — and Minnesota cannot afford to push them away. Not now.
"We can't meet this state's needs if we don't improve access to our schools," Malhotra said. "It's that simple."
Minnesota State came to the Legislature this year seeking to close a $10 million gap in operating funds for 2018-19 that the 2017 Legislature knowingly created when it put 55 percent of the system's two-year appropriation into the first year of the biennium. It also asked for $21 million as a downpayment on a six-year, $150 million information technology upgrade, essential to providing the distance learning needed by place-bound adult learners who increasingly dominate Minnesota State student bodies.
Of that $31 million total request, Gov. Mark Dayton recommended funding $18.5 million; the House, $4 million; the Senate, $1 million. At this writing, the Legislature's bills are in conference committee, where numbers have a way of changing. But there's no sign at this writing that for Minnesota State, they'll change for the better.
Operating funds aren't the only way the 2018 Legislature can help higher education. Lawmakers are also being asked to help both state systems maintain and upgrade facilities. Traditionally, higher-education projects account for about a third of every major state bonding bill. Dayton's big $1.5 billion proposal would put 36 percent into campus projects. The House and Senate? Their $825 million bonding bills direct 21 percent and 24 percent, respectively, to higher education.
Legislators will say that this is not a budget year, that the state just passed a big bonding bill last year (yes — the one they failed to pass in 2016) and that the new federal tax bill makes this a great time to cut taxes.
Here's my essay exam in response: A cut in state individual and corporate income tax rates and estate taxes might be just the thing — if this were 1978. But it's 2018, and state government should be getting Minnesota ready for 2028 and beyond. It ought to be making the most of one of its best strategic tools, public higher education.
Lori Sturdevant is a Star Tribune editorial writer and columnist. She is at lsturdevant@startribune.com.
