Opinion | Michigan’s universities drive economic prosperity. Keep the engines running

A typical fall Saturday afternoon in Michigan. Thousands of fans flock to stadiums in Ann Arbor,  East Lansing, and other college towns to watch their favorite team play football. An ordinary scene on college campuses across America. 

College athletics, and college football and basketball especially, are the “front doors” of  universities — the first, and sometimes the only part of a university that many of our state’s residents are aware of. Yet, universities mean so much more to the state and the country than football and basketball games.

Beyond educating thousands of students, through their commitment to research and discovery, universities serve as incubators of new knowledge,  engines of economic growth, and some of the largest employers of the state’s residents. But how this research process takes place can be a mystery, and federal funding for university research has become fertile ground for the spreading of misinformation by those who oppose what  universities represent. 

Federal funding of university research is not a handout

Federal funding of university research through agencies such as the National Institutes of Health (NIH) and the National Science Foundation (NSF) has often been crudely characterized as  the government “giving” these institutions money to do with as they please. This is simply not true. Institutions compete for grant money by writing proposals to carry out specific work that  the government wants done. The reason that the University of Michigan receives a grant to study new treatments for pancreatic cancer or that Michigan State University receives one to  develop disease-resistant potatoes is that these institutions have the people, the expertise, and  the facilities to carry out research in these areas.

Competition among universities for grant awards is intense, ensuring that only the best, most qualified, and most deserving programs receive the research funds. And all research universities have administrative units dedicated wholly to auditing spending on these grants to ensure that the funds are spent as specifically laid out in the proposal.The government, and by extension all of us, receive the fruits of that research, which can result in products, processes, and services that make people’s lives safer, easier, healthier and more enjoyable. 

University endowments are not piggy banks

Another myth about university finances that refuses to die is that universities possess large amounts of money in the form of endowments that they can spend on whatever they wish. Why should the federal government be giving universities money when they have billions in the  bank? This criticism reflects a lack of understanding of what endowments are and how they function.

The University of Michigan does not have a $19 billion bank account, nor MSU a $4.4 billion one, that can be tapped for any expenditures as desired. Endowments are donations from donors, and the large majority of them (that collectively make up the figure of  roughly $19 billion in the case of U-M and $4.4 billion for MSU) are for targeted activities. For example, suppose an alumna of some institution establishes an endowment in the Department of Mechanical Engineering of $1 million to support graduate students studying robotics. This money is invested in an investment account with a target of earning, say 5% interest, or $50,000, per year. 

Endowments come with restrictions, principally 1) only the interest earnings  may be spent – the principal amount remains untouched; and 2) those interest funds may only  be spent according to the terms of the endowment. The first restriction ensures that the  endowment will continue in perpetuity – after all, that is what an endowment is. The  University of Michigan has been in existence for over 200 years (and Harvard University for over 400 years), and they expect to be in existence for hundreds of years into the future.

The  second restriction ensures that the wishes of the donor are satisfied — rightly so, as it is their  money, not the university’s. In the hypothetical case considered above, the chair of the Department of Mechanical Engineering cannot spend the funds to support a graduate student in Mechanical Engineering studying nanotechnology or a student in the Computer Science  Department studying robotics, let alone redirect those funds to cancer research or to build a new building. They may only be used according to the terms of the endowment — to support a  student in the Mechanical Engineering Department studying robotics. Any other use of these funds is a misappropriation. Insisting that universities deploy targeted endowment funds to  support other activities is asking the people responsible for those funds to commit a crime. 

Michigan’s universities are engines of economic growth

Decades ago, every corporation had R&D facilities carrying out research in areas relevant to  their business. Those days and their industrial research laboratories are long gone. Today, we rely on our universities to perform the research that will keep America at the forefront of innovations in materials, energy, health, communications and national defense.

Our state’s universities, while great sources of pride for Michiganders for their athletic teams, are also tremendous engines of knowledge, innovation, and economic strength. Kneecapping them by restricting or cutting off research funding is a destructive and senseless act of self-sabotage that only plays into the hands of our adversaries across the globe.