This month May Chan and Rachel Vail are settling into very different junior years of college. Vail is 33 and pursuing a B.A. in liberal studies at Portland State University. She has a 6-month-old baby and is making her second run at college. The first time around, a 50-hour-a-week job as a personnel manager -- the only way she could make enough to put herself through school -- distracted her from sticking it out. Now, she says, "nothing is going to stop me from finishing. I'm just going to do it, no matter what." No matter the $40,000 or more of student loans she'll rack up by the time she gets out.

"The degree may not help me pay off the debt," Vail explains. "But it'll keep me from having jobs that are less meaningful, jobs that will make a lot less money."

Chan, who went into the computer engineering program at Oregon State University right after graduating high school in Portland, isn't as worried about finances as Vail. She figures she'll find good-paying work in Oregon's technology sector when she gets out. After all, her school is getting better every year, with an infusion of millions of dollars in state money and big grants from wealthy donors and leading Oregon corporations.

A cool new $45 million building is going up to house classrooms and labs. There's a new international tsunami center.

A micro- and nanotechnology "signature research center" is also being established on Hewlett-Packard's campus in Corvallis (see first person, p. 9).

"I came here because I believed it was the best engineering school in the state," Chan says. "And compared to the past, the way engineering is taught here now is more advanced. You can feel that it's becoming a top school." Millions are being invested by the public and private sectors to get OSU into the top tier of programs nationwide.

Some of the OSU students Chan meets are envious of all these new initiatives -- especially the TekBots, robots that every student in electrical, mechanical and computer engineering gets to work with through their time at OSU, care of a half million dollar grant from Tektronix. One team of students got their TekBot to fly, another made a TekBot sing the OSU fight song. Chan wants to teach hers to spell her name. "Other students say 'Wow! I want to build one of those.' But they don't have it in their program."

Rachel Vail and May Chan present two faces of a profound educational crisis for Oregon, and for Oregon business.

To be sure, things are looking a bit brighter for Chan's engineering future at OSU than Vail's liberal studies future at PSU. And that'll inevitably translate into a more prestigious degree and better job prospects for Chan when she gets out of school in 2005.

But both women are midway through an education that's in serious jeopardy. Oregon's universities are losing state funding right when they need more classrooms, professors and support staff to maintain educational quality while teaching an ever-growing number of students. And they need significant state investment in new research labs and top researchers if they're going to leverage corporate and federal dollars to turn out the high-tech inventions around which Oregon companies of the future will be built.

The Legislature will be cutting tens of millions of dollars from the university system's proposed '03-'05 budget for basic undergraduate and graduate programs, and from high-tech education and research. The effect could reach far into the future, says Richard Jarvis, chancellor of the seven-campus Oregon University System. "You can't take a timeout and just say, 'We've got an economic problem, we'll get back to you in a couple of years,'" he says. "If an employer sees that a state is disinvesting in an educational system, that's going to worry them just as much as their ability to recruit qualified employees. Are we going to recommit ourselves to make sure higher education is a broadly available public good that we reinvest in?"

Oregon has been disinvesting in higher education for years. Through the 1990s the Legislature appropriated a dwindling share of the general fund to the university system -- from 12.2% in '87-'89 to 6.3% in the proposed '03-'05 budget. The university system will likely have $100 million less to work with in the coming biennium than it did in '01-'03 after a series of spending cuts.

"All the states are doing poorly," says Jarvis, who's kicking off his second year in the job ("one year and five special sessions later," he says with a laugh). "We are on the bottom edge of doing poorly."

For Vail and many students like her, the biggest worry right now is budget cuts which will push tuition higher, make classes more crowded and harder to get into and make degrees harder to finish. In the coming academic year, tuition and fees are expected to rise between 7.2% -- at the Oregon Institute of Technology in Klamath Falls -- and 19.4% -- at Eastern Oregon University in La Grande. PSU's price hike will be 15.3%.

Even before the current budget crisis and tuition hikes, the state got an "F" in university affordability from the National Center for Public Policy and Higher Education. The lowest-earning quintile of Oregon families would have to pay 69% of their annual income to put a kid through a four-year public university here, compared to around 25% of income for the poorest families in other states.

"It's incredible," Vail says of the loans she is taking out each semester to obtain daycare, buy food and pay her mortgage. "The cost of tuition could put this out of reach for many Oregonians, even if they do assist us with more financial aid."

Jarvis warns starkly that if the tuition trends in Oregon continue, public university education will become a "private good," available only to those whose families have sufficient resources to pay for a college education. "I think the danger is that we will not be able to grow financial aid quickly enough that we can really maintain access across the social horizon."

Meanwhile, quality suffers. OSU provost Tim White sees the toll the funding crisis is taking on his campus, even as the OSU administration has moved aggressively to restructure departments and increase efficiencies. "Positions are being held open that are left vacant from PERS retirements and the like," he says. "That's a lousy way to manage, by attrition rather than strategy."

Oregon's high-tech community and educational leaders have rallied for years for more investment in one key area: engineering. For the upcoming biennium, the Engineering Technology Industry Council (ETIC) called for about $40 million in state spending to continue a multi-year effort to make OSU a top 25 engineering school nationwide (according to the rankings in US News & World Report) and double the number of engineering grads statewide by 2010. In their budget proposals during the summer, both the governor and legislative leaders proposed cutting nearly half of that money.

Ron Adams, OSU's dean of engineering, is confident that the momentum at OSU won't falter, even in the face of meager state investment. Private fund-raising -- from high-tech companies and wealthy individuals -- could take up some, though not all, of the slack.

Adams is quick to point out that Oregon isn't trying to create a Stanford or MIT here. Rather, he sets his sights on places such as Virginia Tech, North Carolina State and the University of Washington -- state schools with solid reputations and track records for turning out grads and inventions that industry wants to work with.

But OSU is having to be more resourceful than its competitors as it tries to catch up. "Those states are better off than Oregon." Adams says. "Our response has been to raise two private dollars for every one public dollar that we get. We've been successful doing that."

Which raises a sticky question. When university deans turn to the captains of industry to build buildings, fund research and educate students, is there a danger that public higher education will be co-opted by private industry?

Adams insists that increasing public-private partnership is a national trend that's hard to buck. After all, why not turn to Intel to provide wireless infrastructure for an engineering building on campus, or Hewlett-Packard to house a new research center? "A lot of public institutions are becoming state-located rather than state-funded," Adams quips.

"I understand why universities do it: They get desperate for money," responds U of O political scientist Gordon Lafer, who writes about trends in higher education. "But it has negative effects. The only research that gets done is research that has potential commercial application. Plus, the results are increasingly restricted -- in terms of who owns the copyright and in terms of letting other scientists check the results."

Lafer cites another disturbing trend: a decline in good jobs for scientists. In the corporate model of R&D, he says, a small number of principal investigators are backed up by an army of graduate students and post-docs. "The reason that private corporations want to partner with universities is that they're cheap," he says. "There's no place where pharmaceutical companies can get highly trained scientists to work 60 hours a week for $20,000 a year, except the nation's campuses. It's a win-win for the companies and the universities because they get to split the patents and royalties and get income."

In fact, a study of 25 top research universities by the Graduate Employees and Students Organization at Yale found that only 55% of life science PhDs get permanent research jobs in academia or private industry now. Thirty years ago, that figure was 85%.

So, will Oregon's first signature research center -- brought to you by H-P, Xerox, Intel, FEI, LSI Logic and ESI -- be a corporate gravy train for cheap R&D? Jarvis says he hasn't seen any evidence that academic integrity has been compromised. Adams, who came to OSU from Tektronix -- for decades Silicon Forest's de facto "research university" -- is acutely aware of the balancing act needed to manage corporate and university interests. "How much emphasis do you place on private sector innovation, as opposed to objective academic research? There needs to be a partnership with the private sector that produces economic impact. But it can't be the whole game, otherwise you might as well call it H-P University."

Even with significant investments in engineering education and signature research -- whether the money is private, public or both -- Oregon's business community is still faced with a key question. Will current funding conditions make future graduates of our universities desirable to the Hewlett-Packards of the world, and will those companies' employees want to stick around to put their kids in the class of 2024 at an Oregon university? In other words, can the liberal arts and basic sciences hold on until things get better?

The trends aren't looking good. Chancellor Jarvis says that with funding down, student-faculty ratios are now the highest ever. That's left professors such as the U of O's Lafer facing a dilemma every day. "A business wants to have an employee who can look at new information and summarize it so that someone else can understand it," he says. "I get really bright high school graduates who don't know how to write. The most important thing is to give them lots of five- to eight-page papers and then provide a lot of feedback. But when you have financial pressure to have big lecture classes, that drops out."

Lafer sees a pattern of public-private partnership emerging with misplaced priorities. "The business community may be short-sighted in believing it can get what it needs through surgical-strike investments in high tech," he says. "What it really needs is to support general education."

Opinion pollster Adam Davis says higher education is pretty high on Oregonians' list of priorities for rebuilding the economy, but that doesn't mean they're devoted to big-time research. "Oregonians will tell you they want both a top-tier university and a strong undergraduate program that they can afford to send their children to," Davis says. But when they have to choose between the two because of limited state funding, "they are more likely to prefer the latter."

Bill Kelly, CEO of Learning.com, a Portland company that develops technology for K-12 classrooms, is a case in point. He's not convinced that companies like his need top-ranked engineering programs or signature research in nanotechnology or bioscience to incubate the next generation of employees and discoveries. "I bet Leland Stanford [founder of Stanford University] didn't say to himself: 'We need a university that'll spin out inventions and billion-dollar companies,'" Kelly speculates. "He probably said: 'We need an institution for higher education.'"

Chancellor Jarvis says a state university system that isn't both riding the next scientific wave and delivering quality undergraduate education at an affordable price, isn't much good. "The enlightened corporation is going to say, 'That's not where I want to live and it's not where my employees want to live.'"

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Copyright 2003 Oregon Business magazine