Brad Smith: Higher Education in Washington State

Remarks by Brad Smith, General Counsel and Executive Vice President, Legal and Corporate Affairs
Washington State Academy of Sciences
Seattle, Wash.
September 22, 2011

BRAD SMITH: Well, thank you so much. It’s a real pleasure for me to be here this evening, to see a number of familiar faces, and certainly to be with such a distinguished audience.

I also have to admit this is a relaxing end to the day of what has been a little bit of a challenging week. It’s one of those weeks that you may remember from a variety of perspectives, it’s the first week that our high school daughter has had her driver’s license, and has been driving herself to school. (Laughter.) In fact, this was day four, and I just want you to know the first three days went really smoothly.

Nothing serious, but I will admit that just before this I was in the executive staff meeting at Microsoft, and in the roughly 10 years I’ve been in this job there have been a number of times over that decade when people had brought me messages, and it always seems like it’s bad news. You know, we all have to stop, and Steve Ballmer looks at me, and it’s like, okay, who is suing us now, what case did we just lose?

This was a first, though. It was the first time the meeting was interrupted so I could be asked, how do you fix the parking brake in the car? (Laughter.)

I said, you know, I actually don’t know, but there’s going to be a lot of really smart people that are going to be at this dinner tonight, so I may be able to find an answer for you.

I did want to talk to you tonight about the experience that I had, and I think most importantly some of the opportunities that emerged and the lessons that we learned working as a group on the Higher Education Funding Task Force, work that started last year.

It is work that, as you heard, led to the passage in Olympia this year of two pieces of legislation, one focused on tuition setting authority and the other focused on financial aid.

I approached that work a year and some months ago as somebody who obviously is not an expert in higher education policy, nor an expert, for that matter, in the ins and outs of Olympia. I did get a call from the governor, with whom I’d worked for a number of years on a number of issues, including our support as a company for the importance of education and higher education in this state.

When she asked me to lead this task force, I did what any well-trained lawyer does and said, I’ll think about it. And I asked a number of people for advice, and frankly one of the things that really surprised me was initially everybody I asked said, don’t do this. They said, don’t do this, this issue is intractable, people have been asking Olympia for years to give the universities the ability to set their own tuition, nobody can ever agree, the legislature always turns it down, it’s going to take a lot of time, it’s going to end in defeat, and it’s going to be a political failure that you’ll be associated with; what do you need that for?

And I paused, but I thought a lot about just how frankly passionate we have been at Microsoft about the importance of education in this state, and a lot of that passion comes from what we see as a company every day.

I think perhaps the single-most unique thing we bring to this state is the sense of perspective we get from being frankly one of the most global companies on the planet, from having customers in 190 countries, from having subsidiaries in 120 countries, from having employees here in Puget Sound from almost 150 countries.

And we see how education is changing elsewhere, and we see how it is failing to change here at home, and we see how the world is changing around us and we are seeing the changes that it is bringing to this country that we are not yet coming to terms with.

And given that, I decided I would say yes to this, and I got a small but really capable team that I get to work with at Microsoft our state government affairs issues, and I said, I’m going to do this, which really means we’re going to do this, which really means you’re going to do this — (laughter) — and we’re going to find a way to make it work, because the state doesn’t need another report; we’ve got to find a way to get something done.

And I had this wonderful opportunity to work with 18 people who made up this task force, people from the public sector and the private sector, from Western Washington and Eastern Washington, from companies large and small, and we had an opportunity to work with Governor Gregoire every step of the way.

One of the things that I brought was a business perspective that said, if you’re going to do something and you’re actually going to try to make a difference, the first thing you really have to do is figure out what your goal is, decide what it is you are going to try to accomplish and why and put all your energy behind it.

And as we looked at that, and I had the opportunity to learn more, one goal above all else emerged as clear as day, and that was this: We need to enable more students in this state to get a high quality college education, because the world has changed.

You know, a generation ago, in 1973, according to a recent Georgetown study, only 28 percent of the jobs in the United States required any kind of college education. But by 2008, that had grown to 58 percent. And by 2018, nationwide 63 percent of the jobs that are created and that open up will require at least some college education. And as you saw today, in Washington State we are even more dependent than average states on having people with some college background. By 2018, 67 percent, fully two-thirds of all of the jobs in this state will require some college education.

So, when we look at our economy today, it’s so clear that we have an unemployment problem, we have a jobs problem, but it’s also clear that while we have a smart population, we have a skills problem, we have a skills gap, and we are not going to bring unemployment down, we’re not going to lift the next generation up unless we can skill up the next generation of our people, and we have a long ways to go.

As you saw today, Washington ranks 35th in the country in per capita production of baccalaureate degrees; we’re not even at the midpoint.

And that’s why the real starting point for our task force’s work was an endorsement of work done by the Higher Education Coordinating Board that said we need our universities to grow. By 2018, we need to grow BA production, baccalaureate production in the state, at the state’s public universities by 27 percent to 28,000 degrees a year.

And in the STEM fields that you’re focused on here today we even need to do more, we need to do better. We need to grow STEM degree production by 40 percent in the next seven years.

And that really provided a baseline and a focus for everything that we had to think about, because while times are clearly so tough, and it is so easy for people to focus on just trying to hold onto what we have, it is also perfectly clear that simply holding on to what we have is just a recipe for failing slowly. If we are going to succeed, we need to raise the bar, we need to raise our sights and we need a plan that will enable our public universities to maintain quality but grow enrollment capacity. That is what we needed a new financial foundation to address.

As we worked through the issues, we really ended up zeroing in on three. The first is the one that people have focused on the most, which in some ways is the so clearly overdue need to enable our six public universities to do what is done almost uniformly elsewhere in the country, and that’s set their own tuition rates. And that was the single biggest step in many respects that was taken.

It was not an easy step, because in truth we recognized that it was going to be a painful step. Our universities had maintained tuition at below market levels, and given the real financial crisis public higher education was facing, there was simply no alternative to raising tuition by a significant degree.

But we also sought to couple it with a second step, which was to create a financial formula that at least over time would better incentivize the state to grow its own investment and its own state funding support for our public universities.

That’s why the proposal that was ultimately adopted by the legislature gives the universities four years of unlimited tuition flexibility, but then starting in 2015 ties tuition flexibility to state funding. It finally puts before the public and before our state government in Olympia the obvious economic fact of life: if state funding falls, tuition is going to need to rise.

But even that, we concluded, was not sufficient to really put in place a stronger financial foundation for our universities, because the truth is we have relied for far too long on what is basically a two-legged stool for financing higher education in this state. One leg is state funding, and, as you know, that’s been growing wobblier and weaker by the year and certainly over the last decade, and the other leg is tuition.

But as we all know, two-legged stools seldom stand the test of time. And so we decided it was important to do more and add a third leg to the stool, and that was to do something that no other state in the country has done, and that is to create a public-private partnership to build an endowment for student financial aid, an endowment that would welcome contributions from individuals and foundations and businesses, and then match those contributions with money from the state itself, and then put in place a financial formula that would discourage the state from looking at this as an opportunity to reduce its own support from other sources for financial aid by putting into the law that each year that money would be released for scholarships only if the state maintained its prior level of spending on financial aid.

And so it started to give us a new foundation, and it started to give us something to really focus on.

We announced as a task force with Governor Gregoire our recommendations at a press conference on the first Monday in January. And usually when task forces like this are done, they’re done. You write your report, you put it on the web, you go back to work, and you read the paper to see if anybody ever did anything.

And when we had that press conference, we got together and we spoke, and I spoke, and I said, we are not done yet. We got together as a group not because the state needed another report, but because the state needed to get something done. So, we are going to walk the halls as individuals, as institutions, as companies, as a business community.

And in effect what that gave us the opportunity to do, what it forced us to do was learn not only about the policy that we need, but to start to master the politics as well.

And in many respects for me, I think for many of us that was even more enlightening, and I think there’s some lessons that emerged from that that may well be useful for some of the work that you all in this room may do yourselves in the coming years.

I came away with three lessons. The first is that while today many people look to people in government to come together, to meet in the middle, these issues don’t start with people in government, because it’s just not realistic to expect people in government to meet in the middle if everyone outside of government insists on staying in their respective corners and refusing to budge. It actually has to start with groups and individuals outside of government coming together, listening to each other, and working together, and then getting together behind some common proposals.

And indeed so often in the world of education what we see in Olympia is 30 different groups going down with 60 different ideas, and all you get is a cacophony and a recipe for getting almost nothing done.

This was different. There were 30 different groups, but they all got together behind basically the same three ideas. The six university presidents came together, the alumni came together, the business community came together, education groups came together, and we worked together, and that made all the difference in the world.

The second thing I came to appreciate, even more so than before, was that at the end of the day though, it still requires people in government to be willing to meet each other in the middle and make some hard decisions.

And I will say it was an extraordinary opportunity to see the best of what a number of our leaders in this state bring to work each day. It’s really easy today for people to lose hope or become cynical and simply be critical of people who are working in positions in government, but I have to say from Governor Gregoire to our legislative leaders to the chairs of the education committees to republicans and democrats alike people really rolled up their sleeves, because they recognized that this could not be just another year, we had to take some new steps forward.

And in part it was a great testament to the leadership displayed by many, and equally so it was a testament to the willingness of other people who may not have led the way, but at the end of the day, they were willing to set aside their differences and support an idea, even though it had not been their own; and that, too, is something that we sometimes fail to appreciate.

But the third and last lesson that I learned in some ways may stick with me the longest, because it was such an incredible testament to the power of persistence.

As I’m sure many of you know, the way Olympia works, the way any government, the way any capitol works is that there’s so many opportunities for good ideas to die. If they don’t get out of committee, they die. If they don’t get out of one house, they die. If they don’t get through a joint committee, they die.

The ideas that we advocated spent almost the entire session near death. So often I’d go down to Olympia or I’d meet people in the Seattle area, and we’d talk about this, and they’d say, oh, that idea, that was a good idea but that’s dead, right? I’d say, no, it’s just almost dead — (laughter) — and there’s a world of difference, because one thing I learned is if an idea is not dead, it is still alive. And if it is alive, there is still hope. And if there is hope, there is the opportunity for people to keep working hard to get it across the finish line.

And so everybody was delighted when we got the first bill passed in May. That was the bill to raise tuition and give the universities the ability to set their own levels.

But there was still the second bill around the education endowment for financial aid, and that one was really near death, I’ve got to tell you.

And we didn’t give up. Nobody gave up. The people at Boeing didn’t give up. They did an amazing job. The people at Microsoft, the people in the universities, we kept going down to Olympia, and with two and a half hours to spare before the end of the legislative session, that bill crossed the finish line.

I will always remember, and I will always appreciate the people who put in so much time and refused to give up.

So, I look back at the year, and I say, you know, I know times are tough but we actually got some good things done. And that’s a good thing to be able to say, and it makes one feel pretty good.

But as I always say to our folks at Microsoft when they do their annual reviews, which we just finished, they get done in August, it’s not enough just to list what you did and feel good about it; what you’ve got to do is take what you accomplished and then really think about how you will turn that into a platform to do something even bigger and more important in the year ahead.

And that is something that I have seen have a transformative effect on so many people and so many groups and so many projects over the years. I see people who start by accomplishing ideas that are difficult to achieve, but by building each year they end up a few years down the road achieving things that are so big that previously they were impossible even to imagine. That is where we are today.

The real question for us is having finally gotten something done, what do we want to go do next?

I think we have an opportunity as a group, as a community in the state to really focus on three things next year and in the years to follow. The first is what we so clearly need as a state, and that is a reinvestment plan for higher education. We’ve seen funding levels decline. We know that 2012 is not the year when funding is suddenly going to surge back up. We have to be realistic. But we have to start to reinvest in the state’s public universities. As the economy starts to improve, we have to build upon the growing application that people have for the economic engine of growth that our universities provide and for the opportunities that this gives our next generation of students, and get behind a clear-cut, long term reinvestment plan.

The second thing we need to do, the thing that I’m probably most personally going to be involved in doing is growing the endowment for student financial aid.

We set a goal. We said we wanted to put in this state by the end of this decade a billion dollar endowment for financial aid for our students.

We all appreciate, I appreciate the importance of endowments for individual institutions, they are critical, but I also think that we have the opportunity to do something that is even bigger still, to create an endowment that really matters, not just for a single institution but for the entire state, and for a new generation of students and for all of the generations that will follow them.

And the truth is if we can raise $500 million from the private sector, we have it in law, and therefore in our grasp, to get $500 million over the next decade from the public sector as well.

We took the first step down that road in June when Microsoft and Boeing each announced the largest state philanthropic donations that either of us has ever made, $25 million each, $50 million in total, over the next five years, that obviously will be matched by $50 million from the state itself.

We have taken the first step. And most of the time in these kinds of things the first step is the hardest, but there are so many more steps that will need to follow, and we need to seize that opportunity and pursue it.

The third and final thing I think we now have the opportunity really to do is to build on a lot of what you all have been hearing about today, and start to take some real steps, not just with respect to higher education but with respect to K-12 education and STEM education as well, because we not only need to create the opportunities for kids to go to college, we need to equip them with the skills so they’ll be ready to go to college when they graduate from high school, and we need them to graduate from high school to a much greater degree than they are today.

We need to drive innovation in STEM education. That’s why we’re so passionate as a company about the new work of Washington STEM, another nonprofit that Microsoft and Boeing and the Gates Foundation and McKinstry and a number of others in the business community have come together to help create and help fund, and it’s great to see Julia Novy-Hildesley, the CEO of Washington STEM, and a number of other folks spending their day here with you today.

We also need to pursue meaningful reform in the state’s public schools. We need to focus on what matters most, and that’s ensuring that our kids have the opportunity to learn from great teachers. We need to ensure that principals have the ability to hire and retain and train and develop and promote great teachers. And we need to start to come together not with 60 different ideas from 30 different groups, but we need to unite around some of the key legislative steps that will start to strengthen opportunities for great teachers in what can become great schools.

And we need to recognize that great teachers come from many different places, and they don’t always have full-time jobs in the schools themselves.

One of the really interesting things that we’ve had the opportunity to focus on at Microsoft in the last couple of years is a new program called TEALS. It was actually founded by a fellow named Kevin Wang, a Microsoft employee. It stands for Technology Education and Literacy in Schools. It enlists the time of professionals in tech companies so they can go into high schools and help train teachers, and themselves help teach students in new fields like computer science.

You know, last year, there were only 275 students in all of Washington State who took the AP exam in computer science, and only five of them were African-American. Only seven of them were Hispanic students.

And yet this new program just even with its first couple of years now with 30 volunteers will reach 800 students, and the goal is to grow the number of AP tests in computer science by 20 percent this year. That is another example of the kind of step we can take forward.

It’s interesting and important in and of itself, but even more than that, I think it stands for a bigger and broader proposition still, and that’s this: If we’re going to succeed in turning education around in the state and across the country, it’s going to take all of us to get involved. The government cannot do it by itself. Private donations will be important but even that won’t do it either. We need to come together and recognize that this quite possibly is the most important issue of our time, and it will be from people like you and many others that we start to unleash the energy and the talent that it will take to make a difference.

A year and a half ago, I had the opportunity on one of my travels to talk to somebody from China. And he told me something that opened my eyes, and frankly it actually played a big role in my decision to get involved in the task force in the first place.

He said to me, “Do you know what the difference is between the American people and the Chinese people?” I said, “No, but I have a feeling you’re about to tell me.” He said, “It’s this: The Chinese people are saving today’s money and investing it for tomorrow, while the American people are borrowing from tomorrow’s money and spending it today.”

You know, as a matter of economics, as a calculation in arithmetic, it’s an accurate statement of the last decade and it’s an accurate statement whether you’re talking about the public sector or the private sector or consumers across the country.

And that statement really got me thinking. It got me thinking about a lot of things. One of the things it got me thinking was this: I think a lot of people in China are pursuing their own very real version of the American dream. Because for me the American dream has always stood not for one thing but for two. The first is the opportunity that every individual has to better themselves, but the second is the obligation that every generation of Americans has always felt, to leave the country in a better place than they found it, to provide for their children better opportunities than they inherited from their parents.

And this has been so true of the history of our country over so many generations, except perhaps to our own, because we have a lot of work to do if we’re going to ensure that our children and their children have the same kind of opportunities that our parents and our grandparents gave us.

I think that it’s a great thing for the world that the American dream increasingly has become a universal dream, it has become a human dream, but I think it’s also time for us to step back and look in the mirror and say this: This is our dream, and it’s time to reclaim it. And if we’re going to reclaim it, the responsibility lies on our shoulders. The next generation will need to find its own way to achieve its own dream, but it is our responsibility to give them the tools so that they will have the same kind of chances that we did.

So, at the end of the day, I say this: It’s a tough time, and we all know it. When it comes to higher education we are in a deep hole. But we have built a new foundation. It is a foundation on which we can now build further.

So, I say it’s a new day, there is new hope, there is a new door that is open, and it’s up to us to come together and to ensure that we walk through it.

Thank you very much. (Applause.)