Microsoft Sees Fruits of Civic Engagement in Tuition Reform

Just a few years ago it was tough for any local publication to get the attention of Microsoft. Narrowly focused on its corporate mission, the software giant stood aloof from most civic concerns. The company was a little like another great software giant today that distances itself from local issues Amazon.com.

Yet, when the Washington legislature passed painful legislation yesterday giving state universities control over their own tuition rates, an unpopular measure that could result in sharply higher tuition, Microsoft played an important role in its outcome. And the company was there to soften the blow. Microsoft and Boeing each company offered $25 million to launch a fund for scholarships.

Microsoft, a company that had studiously avoided civic engagement in the first decades of its life, has become actively involved in the local scene. And its largely the consequence of Microsofts General Counsel, Brad Smith. Perhaps its because Smith enjoys public discourse. Or perhaps Smith, who led Microsofts defense against the U.S. Department of Justices antitrust suit, came to understand the importance of dialog. During the antitrust case, there was a great deal of animosity toward Microsoft in the region in spite of the fact that the company was so important to the states economy that the chief economist regularly adjusted the states economic forecast to account for Microsofts hiring plans.

Smith says the reason Microsoft is more engaged in the local community is simple: With 40,000 people employed here we feel it is good to have a dialog about our state, he says. There are few companies that have as high a percentage of their employment in one state. We feel the health of Washington State is important.

Last year, as chair of the Washington Roundtable, a group of large Washington businesses, Smith led an effort to focus on reform in higher education. It makes sense to set tuition rates to match what the market can bear and then use some of that extra money to offer scholarships to help out those who cant afford the tuition, says Smith.

At a Seattle restaurant tonight, Smith spent two hours discussing these and other issues with a group of local journalists. Among the things Smith had to say were the following:

Microsofts Future:

The industry is in such a dynamic stage of its evolution…In the last two weeks youve seen three significant things: The Mango upgrade to the Windows Phone, Windows 8 and the new TV initiative with the Xbox. The pieces are coming together. We believe software will do as much to transform TV as it did to transform the telephone.

On the legislative session:

This was one of the most challenging years for the state government, but Olympia did a good job of making difficult decisions. When we look back, this will turn out to be a watershed year in terms of setting the foundation for new growth.

On the End Last Month to 8 1/2 years of antitrust oversight:

IWe deliberatley didn’t celebrate it, but it’s important. It frees up 50 Department of Justice lawyers and 400 Microsoft lawyers. There are things Microsoft will have the flexibility to do like make Windows boot up faster by preventing computer vendors from adding other applications that run during boot up.

On K-12 reform:

Last year we failed on getting tuition flexibility passed in the legislature because people were fragmented. This year we came together on a common issue. We need to build on the momentum in higher education to find a cohesive way to support K-12 reform. There is a common concern around the 32 percent drop-out rate among high schools students. This decade we will produce 300,000 drop-outs. [In terms of drop outs, Washington fell this year to 42^nd place in the nation, down from an already low 35^th.] Yet, its clear that the jobs we create require more education. Unemployment is 9.1 percent overall but its only 4.6 percent among those with four-year degrees. We can attract the best talent I the world, but you want some of that talent to come from here.

Why do private universities with no funding do better, in general than universities with state money? Its because private universities get endowments. But those are mostly universities in the northeast. In the West we have few schools with endowments. How do you create a third leg of the stool for higher education? That’s what we are trying to do with the fund. Ive made calls to other companies [to encourage them to contribute to help boost the fund to $1 billion by the end of the decade.] Currently only state residents at 65 percent of the median state income have access to state scholarships. Under the new approach, students form families with as much as 125 percent of the median income can apply for the scholarships.

Tax Reform:

Microsoft opposed proposition 1098 because the measure would have pushed up Washington state tax rates to a level where it would be difficult to compete with other states for talent.

On Workers Comp:

Its not a Microsoft issue. We self-insure. We dont have people who are injured typing too fast on their keyboards. But workers comp is about giving people options.

Light Rail:

We see it as something that will get cars off the freeway. Its something that can be used by our employees in Redmond…Its important for Bellevue to be decisive about light rail.

Tunnel:

We are generally in support of the deep bore tunnel. Its clear that we cant assume the viaduct will survive the next earthquake. But if we lose the viaduct it would bring transportation to a much slower level and that would be a challenge to the business community. The tunnel would allow a higher volume of traffic. It also allows us to make the most of the waterfront, which is our crown jewel.

AT&T Merger with T-Mobile:

We support it because we see it as one of the better ways to expand broadband capacity.

On Microsoft $42 billion cash hoard overseas:

We cant bring it back under current tax laws. Thats why we issued commercial paper. It was more economically rational. The Skype acquisition will be paid for with foreign money because its a Luxemburg company. Tax reform would allow us to bring that money back. It would make our country more competitive.