In his budget plan for 2005, New Jersey Gov. James E. McGreevey proposed $6.5-million to help create a world-class institute for stem-cell research. Through 2010, the Democratic governor wants the state to provide an additional $50-million in public and private dollars to Rutgers University and the University of Medicine and Dentistry of New Jersey, two of the state's three public research universities, which would jointly operate the center.

In this collaboration, New Jersey college leaders and lawmakers are hoping to cure more than human diseases. They are also hoping this arrangement -- which would be the first in which a state would give public money explicitly for stem-cell research -- would persuade more of New Jersey's high-school graduates to stay in the state to attend college and then remain there to work for local high-tech industries.

New Jersey is among the country's leaders in the export of cranberries and chemicals, but it is tops in the exodus of college students. More than 20,000 of its high-school graduates head to colleges out of state every fall, and many of them never return.

But even if the state could keep those students, its colleges wouldn't have enough room for them right now. Donald J. Farish, president of Rowan University, the largest public college in the southern half of the state, laments that "people are pounding on the doors to get in and we don't have seats to give them."

New Jersey would have to add 70,000 college slots -- more than Rutgers, the state's flagship institution, and Rowan now have combined -- just to reach the national mean of 25 college seats per 1,000 people.

To help attract more students and make room for them, college officials are seeking hundreds of millions of dollars from the state to expand buildings, programs, and student aid. A portion of those funds was supposed to come from a proposed $2-billion bond issue that Governor McGreevey supported and that would have also paid for a controversial plan to merge the state's three research universities. But last December he withdrew his backing after the projected cost of the merger rose and university officials argued over the new system's structure.

Instead, the governor put an extra $70-million for higher education in his 2005 budget plan, a switch from the cuts of past years, and, along with lawmakers, has proposed several measures aimed at encouraging college students to stay in-state. In addition, the state's higher-education coordinating board is moving forward with a comprehensive plan to increase college enrollment and improve performance, and some state officials say another bond proposal is not out of the question.

These efforts to improve New Jersey's public colleges are a break from the past. Historically, New Jersey lawmakers have not seen the "need to build, let alone invest in, a strong system of public higher education," says Darryl G. Greer, executive director of the New Jersey Association of State Colleges and Universities, which represents the state's public four-year colleges, excluding the research universities.

Realizing a Need

Like many other Northeastern states, New Jersey's appreciation for public higher education came late. Rutgers, founded in 1766 as a private college, did not become a public university until 1956. Students have hundreds of college options within a few hours' drive in nearby states. What's more, the state's high median family income of $53,300, and a state financial-aid program that gives money to students who attend private colleges, allow many students to bypass state institutions that have low tuition and weak reputations.

For years, Rutgers got most of the state dollars and attention going to higher education, Mr. Greer says, and was expected to be everything to everybody. The 19 community colleges got strong local support and were able to meet demand because of a law that splits their capital costs with the state. As a result, he says, the Legislature did not devote much money or effort to ensure that the four-year public colleges could handle large numbers of students.

That started to change in the 1980s, when voters passed a $350-million bond to pay for building construction and maintenance. Then, in 1994 Gov. Christine Todd Whitman, a Republican, replaced the state's higher-education governing board with a coordinating board. The new panel eliminated most state controls over tuition, programs, and construction that the state colleges said had forced them to act as local institutions for commuters. In the last decade, the colleges say that the restructuring has allowed them to differentiate themselves and meet the state's needs better.

Big Plans

The improvements that New Jersey colleges have seen in the past three decades, however, have not been enough to overcome their deficits in enrollment, facilities, and research spending. To fix those problems, says Richard L. McCormick, who was hired away from the University of Washington last year to be Rutgers's president, New Jersey needs the same level of ambition that led to the G.I. Bill.

The state is beginning to take those steps. Last November the New Jersey Commission on Higher Education, the state's coordinating board, released the first phase of a new master plan. It laid out goals for the state to achieve by 2010 that included:

Providing enough capital funds and student aid to all the state's colleges, public and private, to enroll up to 50,000 additional students.

Encouraging collaboration between colleges to improve their research capabilities and raise the state's national ranking for acquiring federal-research grants.

Improving academic partnerships with business, like the stem-cell center that the governor has envisioned.

The proposal for the stem-cell center comes on the heels of a much-larger effort that Governor McGreevey spearheaded last year that would have merged Rutgers, the University of Medicine and Dentistry of New Jersey, and the New Jersey Institute of Technology into one public-research-university system.

A steering committee made up of college and political leaders worked for more than a year on the proposal, which would have melded the universities' multiple campuses into three, with one each in Camden, Newark, and New Brunswick. The plan was intended to strengthen research in the life sciences, to complement the many pharmaceutical companies in the state.

The idea, though, never captured the hearts of state lawmakers, many college officials, and the public. Last December the governor announced that the $1.3-billion merger would be too complicated and expensive to pursue for now and put the plan on hold indefinitely.

Looking South

Despite that setback, the merger idea made state leaders realize that expanding research capabilities should be a priority, says Mr. Greer, of the state-college association. Mr. McCormick, of Rutgers, agrees, but notes that the consultants who worked on the proposal said it was the most complicated of its kind in the history of American higher education.

"It died of its own weight," Mr. McCormick says, and of opposition from the Rutgers Board of Governors.

Another possible reason that the merger failed to get support, college officials say, is that it did not look at enrollment issues, particularly in the southern half of the state. There are two million people in the eight southernmost counties of New Jersey and fewer than 20,000 undergraduate slots at the three public institutions in the region -- Richard Stockton College of New Jersey, Rowan University, and Rutgers at Camden. Southern New Jersey is also seeing faster population growth than the northern counties, where most of the population still is and where most of the state's colleges are located.

College officials agree that any solution to the state's problems must focus at least partially on increasing the enrollment and research capacity of southern New Jersey. Many of the state's most politically connected lawmakers -- including the chairman of the State Senate Budget and Appropriations Committee, Sen. Wayne R. Bryant, and the chairman of the Assembly Budget Committee, Assemblyman Louis D. Greenwald -- represent southern districts.

Plans for the Future

Lawmakers are more willing than ever before to give the public colleges the money they need to meet state goals, says Senator Bryant, a Democrat. That is because in the past five years, he says, college presidents have "come out of the ivory tower" and helped the Legislature realize how important public colleges are to the state.

Of the additional $70-million that the governor included in his 2005 budget for higher education, $19.3-million would go to the state's Tuition Aid Grant, the primary need-based financial-aid program -- enough for 2,000 students. A new program, the New Jersey Student Tuition Assistance Reward Scholarship, would get $10-million to pay community-college tuition for 9,000 New Jersey high-school graduates in the top 20 percent of their graduating classes. State data indicate that 95 percent of New Jersey community-college students stay in-state after graduation.

The governor has also suggested raising the maximum amount that community colleges can borrow by $200-million, to $530-million, to help them build facilities to accommodate more students. College officials say there also is talk of increasing the borrowing cap for four-year colleges.

Assemblyman Greenwald, a Democrat, has introduced a bill that would require the Legislature by 2010 to at least match the national average of the money that states give their colleges for operating costs. The bill would also authorize the Commission on Higher Education to calculate the number of graduates each in-state college produces between 2008 and 2010, and how many have jobs in the state. From 2010 on, those figures would determine the increases in state funds that the colleges would receive.

The state also desperately needs to issue more bonds, says Susan A. Cole, president of Montclair State University, the state's second-largest institution after Rutgers. The $2-billion bond attached to the merger would have made a significant dent in the state's problems, she says, but even $1-billion would be enough to make noticeable improvements. Senator Bryant says that a $1-billion bond issue could appear on the ballot as early as November.

In the meantime, college leaders and lawmakers will continue to debate what they need to do to improve the state's higher-education system. "Can we fix it short of a full-scale restructuring?" asks Mr. McCormick, of Rutgers. "The answer better be yes."

Part of the task may be to change the public's perception of higher education in New Jersey, says Assemblyman Greenwald. The lack of state investment in the past has led many students to believe New Jersey colleges are not as good as those in other states. Part of the money that colleges seek should go for advertising the virtues of the state's colleges to residents, he says. "New Jersey has an inferiority complex," he says. "We don't understand the value of what we have."