Special Edition ~ March 2001

Editor's note: The following was presented to the Education Forum Legislative Breakfast on Jan. 4 by Regent Mark Semmens. Appointed by then-Gov. Marc Racicot last spring, Semmens is the newest member of the State Board of Regents.

"Colleges and universities, I have helped work a miracle in North Carolina. This is literally true. I remember that when Georgia Gov. Zell Miller and I started in politics, Georgia and North Carolina -- and the South generally -- were poor places. But in our state, in Georgia, and throughout the South we've seen a transformation. Our state has transformed itself into a thriving and prosperous center for research and technology. "Tobacco Road" is now the "Research Triangle." I cannot tell you what a difference it has made. One of the reasons I have been very interested in education ... is because I want to help people have good jobs. Not just jobs, but jobs that pay people well, that enable them to provide for their families. The best strategy for doing that, I've come to realize, is to stress education."

-- James B. Hunt Jr.
Governor of North Carolina

By Mark Semmens

Good morning. My name is Mark Semmens, and I'm the newest member of the Montana Board of Regents, having been appointed to that position by Gov. Racicot last spring. Perhaps of equal or greater importance to this discussion, I'm also Managing Director of D.A. Davidson & Co.'s investment banking operation. In that capacity, I've worked for 10 years with businesses throughout the western United States -- helping with public offerings, private finances and strategic merger and acquisition transactions. I've seen dynamic, vibrant economics emerge in various sub-regions of the West. I've also had the opportunity to work with numerous growth companies and talented entrepreneurs. I think I have a pretty good idea of what's important to them, and what makes successful regional economies tick.

That's in part why I accepted the governor's request that I serve on the Board of Regents. I've experienced firsthand that there is an undeniable link between investing in higher education and actively participating in the New Economy.

A changing world
In recent years, a paradigm shift has taken place in the world economy and relative value propositions. Whereas the world used to value basic resources and goods and production capacity, it now values technology and services and how we add value to goods through creative and intellectual capacity. That's why the states are investing in education and attracting high-growth sectors of the economy and high-paying jobs.

There is no question that we are severely underfunding higher education in Montana. The Legislative Fiscal Division's own study shows on a per-student basis, we are funding higher education at a level 44 percent below the average of seven peer states. Even looking at state higher education expenditures as a percentage of personal income, Montana still lags behind our neighboring states by more than a third.

That is the current situation.

Still, even given that situation, I think there are two entirely fair and appropriate questions to ask.

The first is, Why should we invest in higher education?

And the second is, How can we afford to invest in higher education?

The returns on education
I'll answer the "why" question in the terms I know as an investment banker -- and that's in terms of a return on investment. By investing in higher education, we enjoy a compelling threefold return on investment.

The first is a direct return. For its $115 million investment in higher education this year; the state will benefit from a $720 million University System budget. It's been estimated that nonresident students and their families spend nearly another $100 million in the state. So there is more than $800 million in direct economic activity that results from our $115 million investment. That's enormous leverage of the state's expenditures.

The second is indirect return. There are numerous businesses and agricultural operations in this state that have benefitted from Montana University System research, technology, facilities and personnel. I'm personally working with three Montana companies right now that have close ties with Montana State University. These are quality companies that are rapidly growing and creating high-paying jobs. By directing greater resources to the university system, we can and will encourage even more of these Montana success stories

The third return is what I call a positive business environment return. In recent years, when companies have been asked to identify the factors that are important to them in locating their business, two of the leading considerations are: (1) access to a productive, trained and educated work force; and (2) access to higher quality schools and universities. If we want to attract successful, growing businesses to Montana, we clearly need to show a serious commitment to education.

How to invest
So now let's now turn to the second question: Even if it's a good investment, how can we afford to invest more in higher education? After all, we're all aware of the tough fiscal situation the state is in.

I'll respond to that question once again with a business analogy, because it's what I know best. When really good businesses realize that there are fundamental changes going on that could affect them, they don't hunker down and hope that the changes won't hurt them too much. Rather, they find a way to make the necessary investments to embrace the change and to turn it into economic opportunity. And they do so in one of three ways:

• They either allocate more of their revenues to the area of needed investment

• They draw on existing cash resources.

• They raise or borrow capital to make the needed investments.

I would suggest that the same options exist for the business of state government:

1. We either raise additional revenues or allocate more of our revenues to investing in education; or
2. We draw on existing cash resources, such as the Coal Severance Tax Trust Fund; or
3. We raise capital through the issuance of tax-exempt bonds. As an example of this alternative, voters in the state of North Carolina just overwhelmingly approved a $3.2 billion bond issue to make yet additional investments in that state's higher education system.

So we can find a way to make additional investments in higher education if we are creative and determined and truly view education as a priority.

Now, I've heard it said that Montana is not North Carolina, or Arizona, or California. That's true. But some surrounding states that aren't a whole lot different than Montana have consciously chosen to invest in education, and are experiencing strong economic growth as a result. States like Idaho and South Dakota and Utah are attracting high-growth sectors of the New Economy and creating exciting job opportunities for their citizens. We can do the same here in Montana.

A Catch 22
I've also heard it said that we need to create more high-paying jobs first, then we can afford to invest more in higher education. But unfortunately, that's a terrible Catch 22. Because we can't hope to create more high-paying jobs in this information-intensive economy unless and until we make a serious investment in education.

Otherwise, we're somehow hoping for a return on investments without having first made the investment. It's not going to happen. It doesn't happen in business. It won't happen in economic development.

So to those who pose the question, How can we afford to invest in higher education?, I would respond in like fashion and with great conviction:

We can't afford not to.

I look forward to an open-minded and constructive dialogue on this important matter in the days ahead.

< PREVIOUS | HOME | NEXT >