Traverse City Record-Eagle

Op-Ed Columns

July 26, 2012

Phil Power: Investing in 'human capital'

Great oaks start from little acorns — and maybe something great will happen as a result of a meeting in Lansing last week that was meant to start reworking our cumbersome School Aid Act into a more effective Michigan Education Finance Act of 2013.

The current School Aid Act was originally written in 1979, and has been amended many times since — and the patches are showing. This is anything but a short and simple piece of legislation. Various folks have described its nearly 200 pages as "exceptionally opaque," "arcane," "anachronistic" and "incomprehensible."

But nobody would call it unimportant. The School Act as it stands it is also the basic law through which something like $14 billion is annually appropriated for and funneled through Michigan schools.

Changing it is a big deal — but a necessary one. The governor has given the job of attempting to rewrite it to the Oxford-Foundation Michigan, a nonprofit organization devoted exclusively to educational and charitable purposes.

Without much doubt, the way the act functions has a profound impact on the way our schools work. As Richard McLellan, a highly experienced Lansing lawyer coordinating the rewrite noted, the School Aid Act "is structured around the concept of 'membership' in a local school district, whereby a student is essentially treated as the property (and responsibility) of the school district because of the school aid funds that flow to the district through enrollment of pupils."

What this has meant in practice is a system of education that is made up of distinct sectors, each with separate funding streams. They include: Early childhood (i.e. pre-kindergarten); elementary and high schools; community colleges, and four-year universities.

Unfortunately, given the "we can't possibly increase spending" mentality that drives all money discussions in Lansing, whenever one sector asks for more funds, the rest howl in protest.

When Gov. Rick Snyder proposed last April in a special message on education a new "Any Time, Any Way, Any Place, Any Pace" public education system, he was suggesting a model in which the state's per-pupil foundation grant not be tied exclusively to the school district a child attends. That, in turn, leads to the idea of "proficiency-based funding." That would be one where money moves in response to a student's demonstrated knowledge and skills, regardless of where the young person manages to achieve success.

So the obvious question is: If the objective is overall student "proficiency," why should education money be allocated into separate pots for early childhood, K-12, community colleges or universities?

That's not a trivial matter. Education, by whatever guise, consumes by far the largest share of Michigan taxpayer dollars.

A more powerful and much clearer way of framing this entire subject is to use the phrase "human capital," suggesting the idea that what we are really doing is investing in each citizen's stock of knowledge and skills, regardless of what bucket of funds we use to support it.

Putting the discussion in terms of human capital achieves two important objectives:

1) We force the discussion into the returns that come from investment. Businesses invest in new factories or new equipment because those investments will yield a return, often over many years. Returns on investments in human capital yield a payoff far greater. For example, research suggests that the payoff from investing in early childhood education could be as high as a dozen times the money spent.

Kids who participate in early childhood programs are ready to start kindergarten, don't have to repeat grades, are more likely to graduate, more likely to have stable marriages and less likely to wind up on drugs or in prison.

2) Michigan's system of investing in our citizens' human capital should be seamless. That means it should flow to individuals from birth to early childhood to kindergarten through high school, to community college and, where appropriate, to four-year universities. The real issue in such a system is what knowledge and skills young people learn as they proceed, not which part of the bureaucracy "owns" a student at any one time.

State Superintendent of Instruction Mike Flanagan made the point at the meeting when he said, "We've got to stop arguing who's stealing whose money. We cannot be boxed in by classifying the source and use of particular funds."

In his special message on education last April, Gov. Snyder wrote about the idea of a "state education system that integrates all levels of learning." What he really means is an integrated, coherent system of investing in the human capital of Michigan's citizens, an investment that will produce enormous returns in our future prosperity.

Much of this depends on how the rewrite of the School Aid Act turns out. But this much is certain: This is a big, big subject vitally important to our future.

Phil Power is a former newspaper publisher and University of Michigan Regent. He is founder and president of The Center for Michigan, a centrist think-and-do tank. The opinions expressed here are his own. By e-mail at: ppower@thecenterformichigan. net.

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