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Rockefeller Institute: New York and the Global Economy

October 06, 2008

Carl T. Hayden, Chairman, State University of New York

October 6, 2008


In a more innocent time, while wearing another hat, I could be heard to argue that low skill wages would inexorably move to low wage countries and that our future was dependent on educating our young to high levels of skill and knowledge.  The proposition seemed logical enough, as far as it went.  The assumption was that we in America would succeed in holding onto a disproportionate share of jobs requiring high skill.  What I (and others) failed to foresee was that one day even jobs requiring high levels of skill and knowledge would migrate to countries that could provide them at a lower cost.

In case you haven’t noticed, Bangalore is no longer just phone banks responding to service inquiries.  It is where many American businesses go to acquire engineering services, or software patches or the interpretation of CT scans.  A highly skilled, highly educated workforce is creating a competitive advantage for India.

Next door, in China, 50 new universities have sprung to life in a single province (Jiangsu), in a single decade.  The Chinese recognize that the future belongs to those who best create, nurture and commercialize intellectual capital. Hunter Rawlings, Chair of New York’s Commission on Higher Education, put it this way:  “Top research universities are the key to the intellectual and economic future in a knowledge economy.” 

The Chinese “get it.”  So, too, do the Irish.  In 1960, Ireland was the sick man of Europe.  No longer.  Today, Ireland has Europe’s highest standard of living.  Its workforce has more than doubled in the last decade.  It has taken the policy decision to make both secondary and university education essentially free for its citizens.  The result, it is claimed, is “the most highly educated workforce in the world.  The major companies of the world are beating a path to Ireland’s door.

In America, we still believe profoundly in the value of higher education. Ominously, however, the percentage of our population that has higher education may actually be headed down.  Those holding college or graduate degrees in the age 25-34 cohort are less than those 55-64.  In the crucial 25-34 group, we now trail Canada, Japan, Korea, Sweden, Finland, Norway, Belgium and Ireland.  The National Association of Manufacturers asserts that “if current trends continue, the American workforce will be less educated in 2020 than it is today.

Higher education, then, is both our best hope and our Achilles’ heel.  Whether we choose to invest in that sector is a public policy decision of great moment, with implications for our competitiveness, our standard of living and our commitment to opportunity.  It is a public policy decision made vastly more difficult by the depressed state of our economy.  In New York, the problem is compounded by our feast or famine reliance on Wall Street.  We have utterly failed to learn the imperative of diversification.

In New York, we are confused and, I would argue, increasingly myopic.  We continue to try to cut our way out of recession.  The state university has been cut more than $210 million dollars in 18 months.  You cannot cut your way out of recession;  you must grow your way out of recession.  And you do that by investing in higher education, not by disinvesting.  We have been disinvesting in SUNY for nearly a generation and that is a failed policy.

What do I mean by “confused?”  Well, on the one hand, you have $210 million in cuts (and perhaps the prospect of more).  The message there is that higher education is the same as everything else.  On the other hand, you have in plain view, right here in Albany,  not only the theoretical basis for our economic revitalization, but the most heartening, dynamic, impressive example of what revitalization looks like, and so close you could almost hit it with a stone.

It is called the College of Nanoscale Science and Engineering (aka Albany Nanotech).  It is a part of SUNY at UAlbany.  It was created in 2004, and under the inspired leadership of Alain Kaloyeros has already generated 3000 new high tech jobs.  1000 researchers work there representing 250 different companies in a unique set of collaborations.  Nikkei Electronics calls CNSE “the world’s pre-eminent research center of nanotechnology.”

Great companies like IBM have made it clear that they will seek swifter entry into dynamic new fields by going anywhere in the world the best research is occurring.  In nanotechnology, that is UAlbany at CNSE.  This strategy represents the next wave:  the quest for highly skilled workers never slows, but at least as important is the pursuit of cutting edge research.  IBM has created a new word, “Collaboratory,” to describe its emerging business model.  It is a design that builds on laboratory-based collaborations.

So, cutting edge research is (and will be) the key to economic vitality. Great research universities undergird the exuberant growth at the Research Triangle and Silicon Valley.  SUNY is the perfect research infrastructure for New York.  SUNY has a presence everywhere, particularly Upstate. And SUNY is capable of cutting edge research, not just at Albany, Binghamton, Buffalo, and Stony Brook, but at its great comprehensive colleges like New Paltz and Fredonia and Geneseo and at Environmental Science and Forestry (ESF) and its technical colleges like Morrisville, Cobleskill and Delhi.  The research infrastructure is already in place.  All that is required is the commitment, the decision to invest. And the wisdom to convert the intellectual capital thereby created into entrepreneurial opportunities for New Yorkers rather than the easier, less productive option of licensing agreements.

The Commission on Higher Education laid before us an invaluable template.  It recognized, as it had to, that SUNY has suffered from too little revenue, too little investment and too much regulation.  We are the most hamstrung, highly regulated, least nimble public higher education system in the country.  It noted that NY had lost 27,000 jobs and $2 billion dollars since 1980 because its investment in basic academic research had declined from 10% to less than 8%.

No surprise, then, that the Rawlings Commission (CHE) recommended a dramatic expansion of SUNY’s research capacity through the addition of 2000 new faculty members, many world class.  The Commission rightly saw research faculty as the engine for economic revitalization.

So, the time to choose is at hand.  The Legislature will return next month to write the next chapter.  It can choose to leverage the example of Albany Nanotech and invest in SUNY’s research capacity in every corner of New York.  Or, it can continue the failed policy of disinvestment.  We have polled our presidents and we know what that future looks like:

enrollments frozen; faculty hiring freezes, perhaps layoffs; reductions in student aid; research curtailed.  We are well past the point where these reductions can be absorbed without real world consequences.

           But, viewed through the right lens, this is a moment of shimmering opportunity.

It does not cost the state a dime to take the handcuffs off SUNY.  The whole awful panoply of approvals that have us in a straight-jacket and which so compromise our ability to compete can be banished in months.  We will present the Governor and the Legislature with a blueprint for enhanced SUNY flexibility that will save the state tens of millions in unnecessary compliance activities.  SUNY has an independent board that must meet its fiduciary obligations.  It is audited annually.  That is sufficient everywhere else in America.  It should be sufficient in New York.

           SUNY should be allowed to be entrepreneurial.  We can help to fund ourselves.  Examples abound around the nation of mixed-use activities that allow public universities to generate revenue.  SUNY should be encouraged, even incentivized, to pursue independent revenue streams and to maximize the value of existing assets through sale, lease or other arrangements.

           SUNY needs tuition reform.  There has been one tuition increase in 13 years and it was 29%.  In that year, (1995), the door to our great public university slammed shut for thousands of students.  We need a rational tuition policy, one that allows for small, incremental, predictable increases, one that will permit students, their families and our campuses to plan, project and make informed decisions.  What we have now is chaotic and counterproductive.  I would hazard a guess that even our students would prefer something sensible and foreseeable rather than the patently irrational tuition scheme we pursue at the moment.

           SUNY has always been the keeper of every New Yorker’s egalitarian dream. It has always been the wellspring of opportunity for those not born to affluence.  Today, SUNY takes on even greater significance.  Its research potential represents our best hope for economic revitalization and economic diversification.  Those elected officials who supported the state’s investment in Albany Nanotech understand this.  In this moment of maximum fiscal distress, they must once again embrace the insight that brought Tech Valley to life, but this time the vision must embrace the entire state.

SUNY is the key to our future.  We neglect it at our considerable peril.


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Roberta Adams

Chairman Hayden's letter is eloquently written and states in basic terms the essence of our funding dilemma in New York with respect to SUNY. We are hearing a similar appeal on a Federal level as well; contrary to draconian slashing
of jobs and budgets, the Nobel Prize economist, Paul Krugman, tells us that money spent for jobs creation and the benefit of local community
enterprises, is key to recovery. If the well-planned
SUNY programs and stellar faculty in place are reduced
because of stark budget reductions, what hope do we have to fuel the economic engine of tomorrow? A starved
organism can not perpetuate itself in a healthy state. In cutting the resources to fuel SUNY, we lose youth and brain power to other areas, and we abandon areas of New York which derive benefit from local commerce as a result of SUNY's presence in their communities. Unlike the Feds,
local governments have fewer
earning paths. Depriving the New York tax base of current and future earnings potential is not the road to economic vitality or security.

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