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The Story of the Michigan Education Trust

The Michigan Education Trust (MET) was the nation’s first state-administered pre-paid college tuition program. Over time, it has been one of the most popular education programs ever passed by the Michigan Legislature and signed into law. Over 115,000 people have purchased MET prepaid college tuition contracts since the program started in 1986. However, passage was no slam dunk. Here’s how it became law in Michigan.

Here’s the story behind one of the key policy accomplishments of Gov. James J. Blanchard, who served Michigan in the U.S House of Representatives from 1975-83 and then was governor from 1983-91.

The Michigan Education Trust (MET) is identified by the Internal Revenue Service as America’s first statewide prepaid college-tuition program. Since its inception in 1986, more than 20 other states have adopted similar programs. Many continue to operate today, though the rapidly and largely unanticipated rising of tuition rates at public universities have caused some states to reconsider their attempt to replicate Michigan’s landmark and highly successful program. Besides acknowledging Michigan’s pioneering efforts in prepaid tuition—buying future tuition credits at less than today’s tuition price — the IRS.gov website credits a 1994 case that the state of Michigan brought against the U.S. government (40F.3d 817, 6th cir) with guaranteeing federal tax exemption on the income generated by tuition savings programs, now commonly known as 529 programs.

To say MET was a huge success is an understatement. During the MET’s first week of open enrollment, it was said that participation rates exceeded the first-week nationwide participation rate of the first federally exempt retirement savings accounts.

Here’s how the MET program happened.

It apparently started when Blanchard told Michigan state Treasurer Bob Bowman of his fascination with the promise of New York City philanthropist Eugene Lang. Lang’s promise, as reported on CBS’s “60 Minutes” news show, was that he would pay for the college education of every child of the Harlem elementary school he had attended.

Within a month or two of the 60 Minutes story airing, I saw an article in the New York Times by reporter James Barron. The article described a Duquesne University program by which alumni with children of any age could pre-pay Duquesne tuition “at today’s price” for use by their children at such time as they were ready for college.

I showed Barron’s article to Blanchard as we were returning, by air, from an outstate trip. I said I thought we might be able to do this on a statewide basis. “Figure it out,” the governor said. I was not aware that, in reaction to the Lang “60 Minutes” spot, he may have already given a similar charge to Treasurer Bowman.

Coincidentally, about that time I had become concerned about how a guy with a job in state government could possibly save enough money to ensure his four daughters of a good college education. One solution had been provided to me by a local stockbroker who had urged me to start buying “zero-coupon bonds,” the future payout of which could be timed to coincide with the high school graduation dates of our daughters.

Then it hit me. I called my broker friend and asked him to run a chart that could show the average annual increase in the value of American publicly traded stocks over the previous 50 years. I wanted to compare that trend line to the trend line of the average increase in tuition at Michigan’s public universities over that same period. I had a hunch. My hunch was right. And here is the “trimtab” notion, that simple, single issue that made the idea of a state-operated prepaid tuition program so powerful.

The difference between expected stock market return on investments and average tuition growth would produce a spread that, instead of producing profit for shareholders, could be used to reduce the future cost of tuition to a price below that which is being charged today.

Since America’s “Great Depression” of the 1930s to that time in the mid 1980s, the stock market average returns had increased at a faster rate than increases in Michigan public university tuitions. The difference, as delineated in the first draft of what became the MET program, could be factored into determining what today’s price (per average state university credit hour) would have to be set to cover the cost of tuition at any of the 13 state public universities. Since no shareholder profit would be figured into the equation, the younger the child for whom future tuition is being “purchased,” the greater the discount against today’s price of tuition could be.

The first draft of MET was actually titled the Baccalaureate Education Student Trust (BEST) proposal in the detailed legislation, much of which was drafted by Bowman and his staff at Treasury. (Ironically, perhaps, the exact same title for a prepaid tuition program would be used for a subsequent Tennessee program. And finding this out only this year caused me to wonder if I had expressed my appreciation for the good advice to “get the talk right” I received from Charles Overby, press secretary for Tennessee Gov. Lamar Alexander, with whom I shared an early draft of our BEST program. If so, this is only one of many examples of the national impact of MET.)

At a private dinner recently held by Blanchard, I was reminded by former Treasurer Bowman that it was an old friend of mine, Republican state Senator Bill Sederburg of East Lansing, who suggested to Bowman that the name of the proposed initiative be changed from BEST to MET. Bowman told me that he had assured Sederburg (who had served on the State Board of Education when I was lobbyist for the Department of Education) that despite the fact that BEST had been the name on my initial draft of the plan, it would be okay for the senator to offer an amendment changing the program’s name to MET. Besides Sederburg, a number of other Republican senators, including then leader and future Gov. John Engler, and future school superintendent Sen. Dan DeGrow of Port Huron, supported passing the MET proposal into law.

Well before the plan was introduced, I had tried the idea for the “BEST” prepaid tuition plan out on a couple other Blanchard insiders. One insider, who I worked with on a daily, if not hourly basis, was the governor’s Deputy Press Secretary Tom Scott. Scott would later become the founder of an on-line, politically oriented news magazine called “Dome,” in which a decade or so ago in an article entitled “The Real Heroes of MET,” I was to summarize for Tom’s readers the roles that New York Times writer James Barron and Bob Bowman and others had played in getting Blanchard’s MET program up and running.

I also early had flown the idea for a statewide, prepaid tuition program by the governor’s Chief-of-Staff Phill Jourdan, and later by Blanchard’s long-time fundraiser and loyal friend, Ron Thayer. Thayer was enthused and encouraging. In fact, some 30 years later in a March 2016 e-mail to a speechwriter friend of his, Ron encouraged his friend to sign on to what eventually became Gretchen Whitmer’s 2018 gubernatorial campaign. Thayer wrote the following (in all capital letters) urging his friend to call me about getting involved in the developing campaign:

“AS YOU KNOW, RICK IS THE GURU OF PRESS RELATIONS, PUBLIC RELATIONS, COMMUNICATIONS, ADVERTISING AND POLITICAL CONSULTING. BESIDES ALL OF THAT, RICK WAS THE ONE WHO THOUGHT UP AND PROMOTED THE MICHIGAN EDUCATIONAL TRUST (MET) PROGRAM THAT SET UP PRE-PAID COLLEGE TUITION SCHOLARSHIPS FOR SOME 75,000 IN A SHORT PERIOD OF TIME. HE WORKED FOR JIM BLANCHARD, MIKE DUGGAN, AND GRETCHEN’S FATHER, DICK WHITMER, AT BLUE CROSS BLUE SHIELD.

My wife Debbie knew of the BEST idea early, partly because she had overheard me discussing various aspects of the plan on several phone calls with Treasurer Bowman. Bob recently reminded me that besides the nightly phone calls, we spent many mornings developing a marketing plan for MET at regular breakfasts at the local “pancake house.”

I knew BEST could be seen as controversial, perhaps revolutionary. It did involve, after all, some public spending (to get the program up and running) for what could be seen as a “private purpose.” This may have been the reason for Bowman’s initial skepticism. I also feared that the promise of MET could be written about by members of the Capitol press corps through reporters’ skeptical prisms, if the unique initiative would be written about by them at all. So, these issues helped me decide, early on, to begin discussing our plan in Michigan with New York Times reporter James Barron, acknowledging the key role that his Duquesne article had played in creating MET, and assuring him that he would get an exclusive shot at breaking the Michigan news of America’s pioneer state-operated prepaid tuition program in the New York Times.

I believed the idea was sound public policy, for sure, and was fortified by the thorough analysis Bowman and his staff had done on the early draft. And as former Attorney General Frank Kelley was fond of saying: “Good public policy is good politics.” I was sure that if Bowman and his team could make it work, BEST would be a chance for Blanchard to show a large segment of the voting public, especially suburban Republican voters, that they could no longer say that “state government never did anything” for them. But two key issues stood in the way of getting the program off the ground.

The first challenge involved making sure that Bowman could make the numbers work. After all, I was “just a PR guy.” Bowman, on the other hand, was an acknowledged and highly respected “Wall Street wizard.” And within a relatively short period of time, working from my BEST draft and with the help of the data I had obtained from my local stockbroker, and a great deal of data he had generated, Bowman had not only become convinced of the efficacy of this pre-paid tuition scheme, he became a passionate and tireless advocate for the plan. Needless to say, without Bowman’s advocacy MET would have never happened.

The second potential obstruction I anticipated was the possible rejection of the idea by the presidents of Michigan’s 13 four-year universities. I could not imagine how the program could receive a more fatal blow than if the bovernor or the state treasurer heard from Michigan’s public university leaders that the BEST idea could be harmful to the state public university system.

I told Blanchard’s then Chief-of-Staff Phill Jourdan that I wanted him to come up to my office for a very special and confidential meeting. I had invited Jack Breslin, who was Michigan State University’s governmental affairs director, and Keith Molin, Breslin’s counterpart from the University of Michigan, to join Grand Valley University President Arend D. (Don) Lubbers and Wayne State University President David Adamany to meet in my Capitol office. Over the years, I had gotten to know these folks, and I told them I needed to get their honest reaction to an idea that, if it worked, could have an impact on their institutions.

At the meeting, I laid out the framework for the BEST program, showing the university leaders the Wall Street compound interest chart comparing average stock market returns to the annual tuition increase numbers. I probably began the conversation with a discussion of the need of our blue-collar state to elevate the aspirations of an up-coming generation of the sons and daughters of automakers— an effort that by paying for their future college education in advance might change the dinner table conversation from “I don’t know how we are going to pay for that” to “You better study hard because you will be going to college. After all, it’s already paid for.”

I distinctly recall, after the positive reaction of the university leaders, that Chief-of-Staff Jourdan summoned me down to his Capitol office to hear what I thought might be his reservations about the proposed BEST program. Quite the contrary. “Now I know,” Jourdan said, “why the governor picked a Ph.D. in education to be his press secretary.”

By the way, as I was leaving the employment of the governor, Treasurer Bowman asked me to visit him in his office. When I arrived, I was greeted by Bowman and other Treasury staffers who presented me with a framed tribute from the Treasury and MET staff, which remains among my most treasured mementos. The tribute says: “In recognition of his outstanding efforts, Richard T. Cole is hereby granted the title of Grandfather of America’s first pre-paid tuition plan. Michigan Education Trust.” Below the inscription, and also under glass, is a cigar, which has upon it these printed words: “It’s a MET.” While I appreciated the gesture then, as I do now, I recall being somewhat unsure as to whether Bowman was ascribing the actual “fatherhood” of MET to Blanchard, or to himself.

I recommended to the governor, and by then to Bowman, how I thought we should announce MET to the world. MET can be a national story, I thought. And in that respect, and because we had read about the Duquesne plan in the New York Times, the governor’s plan should be given first to Barron.

By the time MET was passed into state law, its implementation was being heralded in news accounts around the country. Within a few weeks, among the calls on the subject I had received in the press office was a call from an outraged New York professor who, I suspected, also had been talking with James Barron after reading his front-page story on MET.

The professor, who I believe had also talked to Bowman, was accusing me of stealing his idea for a national prepaid tuition program, an idea that he said he had submitted to the U.S. House of Representatives a couple of years earlier. I had never seen what this professor claimed was an account of his plan in the Congressional Record.

Instead of arguing with the professor, I followed up with the professor by saying words to the effect that “if you put the concept of prepaid tuition in the Congressional Record as you say you did, it would seem to me that you thought it was a good idea and that the public would benefit from it. Right?” And I remember thinking how rather odd it was that this professor was threatening me. “Why wasn’t he calling to thank Gov. Blanchard for pushing this great idea forward at the state level,” I thought.

I doubt that my question had changed the professor’s thinking. I remember distinctly that, as we were ending the phone call, he said I should expect to hear from his attorney. I just laughed. The irony is that here I sit, almost 40 years later, wondering if I am any better a person than that disgruntled university professor who threatened to sue me. As I read my account of the creation of the MET, it kind of sounds like I think I should have gotten more credit than I did for what became the first of dozens of state-operated pre-paid college tuition plans across America. To the degree that this is the case, I can only say “How petty of me.”

It turns out that I am the first to point out that any idea, no matter its potential, is ultimately judged by its execution. But for the inspiration and direction of an extremely innovative governor, and the development and promotion of MET by one gifted state Treasurer, BEST, or MET, or whatever that disgruntled university professor would have called his “national plan” would most likely be a footnote in an obscure and unread copy of the Congressional Record.

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