Before the COVID-19 pandemic hit, Brookings and others were warning about the increasing concentration of economic activity—particularly the tech economy—in a small set of coastal “superstar” cities. Cities such as San Francisco and Seattle became the places startups and tech entrepreneurs seemingly had to be, despite rocketing housing costs, congestion, and pollution.
But over the course of the past year, many coastal techies have been fleeing those hubs, tired of being quarantined in tight spaces and able to work remotely. Those who did may now be realizing there could be a different and better way to live and work, and helping to benefit long-neglected, still-emerging tech centers in the process. However, the institutional engines for this surprising growth may be at risk of collapse.
As they disperse to communities like Boulder, Colo., Nashville, Tenn., and other emerging tech centers in the middle of the country, many entrepreneurs may have been surprised to learn that tech, talent, and innovation can thrive in the heartland—not to mention a dynamic culture, more robust quality of life, and a less manic and financially insane existence. As Wisconsin Technology Council President Tom Still noted in his call for techies fleeing California to flock to the Badger State, his region offers what he calls an “I-Q Corridor”: “The ‘I’ standing for interstate, innovation, intellectual property and investment; the ‘Q’ captures quality of life, research, education, workforce and just about anything else worth bragging about.”
As they disperse to communities like Boulder, Colo., Nashville, Tenn., and other emerging tech centers in the middle of the country, many entrepreneurs may have been surprised to learn that tech, talent, and innovation can thrive in the heartland.
What these heartland tech destinations all have in common—and what positions them well to grow a critical mass of innovators, entrepreneurs, tech talent, and financiers—are leading research universities. These are universities that, for years, have been a font of new technologies and the highly educated talent that creates them. These institutions are particularly important to the economic future of the industrial Midwest, where much of the region is undergoing a spotty transition from old economy to new.
We have written previously about higher education institutions being an important fulcrum for the economic revival of the Midwest’s older industrial communities. Colleagues at Brookings also found the Midwest’s regional public universities are significant contributors to the region’s economic vitality, including by playing a critical role in closing higher education attainment gaps by race and income.
These institutions have helped a number of Midwest communities turn an economic corner and thrive anew in a globalized, knowledge-driven, tech-laced world. For evidence, look to the University of Iowa in Iowa City and its burgeoning bioscience industry, or Pittsburgh’s rebirth from collapsed steel town to an AI and robotics capital thanks to Carnegie Mellon University and the University of Pittsburgh.
But just as many heartland communities are poised for growth as tech talent disperses from the coasts, these engines of innovation are in an increasingly precarious position. Since they are mostly public, the Midwest’s research universities live or die on federal R&D investment and state-based operating funds that historically have kept tuitions low and put higher education within reach of all. But no more: Most of these universities have been dealing with decades of state budget cuts, forcing tuition hikes that push costs out of reach of many.
Midwestern states and their higher education institutions also face fierce demographic headwinds, in the form of an aging population and declining school-age enrollments. Michigan, for example, has seen a 200,000-person drop in its K-12 school-age population over the last two decades—a trend line projected to extend into the foreseeable future. Wisconsin’s university system is facing similar demographic realities. As Brookings has pointed out, regional public university enrollment in the Great Lakes region reached its high point in 2011 with over 971,000 students, but has fallen by over 10% since. This enrollment decline combined with state disinvestment has been generating a growing financial crisis for these schools.
Adding insult to injury were Trump-era immigration bans, which cut off supplies of new students and resources for institutions and their home communities. International students had been an important counterbalance to the demographic and fiscal challenges facing Midwest colleges and universities, providing a source of student growth and revenues and delivering positive economic impact on Midwestern communities. But those benefits have now disappeared.
COVID-19 has further strained state budgets, while pandemic shutdowns raised costs and reduced enrollments. Virtual learning is upending many struggling schools’ business models. And Midwest universities still face hostile state legislatures and growing anti-intellectualism, which make them easy targets for further cuts during any fiscal crisis.
The Biden administration and the new Congress may deliver some welcome support for heartland innovation and enhanced R&D funding if they can pass some version of the Endless Frontier Act introduced last summer, or the even more fulsome Innovation Centers Acceleration Act. Optimistically, President Biden’s pandemic relief plan includes a welcome $350 billion for state and local governments, which could relieve fiscal pressure among the Midwest’s network of public universities.
State governments in the Midwest are so fiscally strapped they can’t do much—even if they wanted to—to meet the financial crisis of the region’s colleges and universities. Federal innovation funding and COVID-19 aid for state budgets would go a long way toward keeping these engines of economic development alive. As coastal entrepreneurs and tech companies consider taking up residence in America’s heartland, there is a real opportunity to reshape the nation’s lopsided employment picture—let’s not waste it by neglecting our public universities.