Past work by the senior author reinforces these observations about higher education spending and economic growth. In fiscal year 1980, the proportion of personal income spent by Michigan on higher education was around one-third more than the proportion spent by Illinois and 15 percent more than that spent by Ohio. Over the next two decades, Michigan dramatically increased its already above-average commitment to universities. By 2000, it had the sixth highest proportion in the nation and was spending 2.34 percent of its personal income on state government support for higher education. This was nearly double Illinois’ 1.26 percent and well above Ohio’s 1.58 percent.
This additional university spending did not pay off in greater economic growth. In 1980, per capita income in Illinois was 5 percent higher than in Michigan. By 2002 the gap had doubled, and Illinois residents enjoyed income that was 10 percent higher on a per capita basis. In fact, of the three states, Michigan had the largest higher education spending commitment but the lowest growth, while Illinois had the smallest spending commitment but the highest growth. Ohio fell in the middle, also growing faster than Michigan, but not as fast as Illinois.
Similar trends appear elsewhere. In 1977, North Dakota spent 2.78 percent of its personal income on higher education, compared to 2.03 percent in South Dakota. North Dakota’s spending had risen to 2.88 percent of income by 2000 — the highest in the nation — while the figure in South Dakota fell to 1.56 percent. Nevertheless, over the same period per capita income in lower-spending South Dakota grew substantially faster than its neighbor to the north — nearly 57 percent compared to a little more than 35 percent. More recently, 2006 data collected by the nation’s second largest moving company, United Van Lines, shows that North Dakota tied Michigan as having the highest proportion of outbound moves compared to people moving into the state — 66 percent. In contrast, 55.9 percent of South Dakota moves were households coming into the state. Past data from this source has been found to be highly correlated with U.S. Census data.
Nationwide, from 1980 to 2000, the 10 states with the most rapid economic growth expanded their spending on higher education on average at a modest pace, from 1.31 percent to 1.44 percent of personal income. In the 10 slowest growing states, higher education spending grew rapidly on average, from 1.80 percent to 2.21 percent of personal income. It is likely that university presidents in those slow growing states were making the same arguments now being heard in Michigan, that increased appropriations for their institutions are the key to future prosperity.