Michigan high school graduates planning on going to college will get a nice present under the state Christmas Tree (no longer saddled with the silly "Holiday Tree" name, thank goodness.)

Starting with the class of 2007, graduates will get $4,000 in state scholarship money if they complete at least two years at a public or private college or trade school in Michigan and maintain at least a 2.5 grade point average.

The program, originally called the Michigan Merit Scholarship Program, has now been renamed the Michigan Promise Grant, a bow to the exciting Kalamazoo Promise program that helps pay college tuition for graduates of Kalamazoo Public Schools.

Here's how the Michigan Promise Grant works. Students who pass new ACT-based standardized tests and go on to college will get $1,000 at the start of their freshman year, another $1,000 at the start of sophomore year and $2,000 when they finish the second year.

Checks will be sent directly to participating schools, which will apply the money to student bills. Best guess is the program will cost around $110 million in 2007-2008, somewhat less than the present $2,500 Michigan Merit program costs the state. Within a few years, however, it will cost more -- and that will be money well spent.

Thank you notes from students (and their tuition-paying parents) should go to Gov. Jennifer Granholm. Concerned about the low skill and education level in the Michigan work force in the face of a rapidly globalizing economy, she convened the Cherry Commission back in 2004 to study the problem.

Their report recommended a goal of -- within a decade -- doubling the percentage of Michigan high school graduates who get higher education degrees. However, the Cherry Commission ducked the issue of how to pay for it. This is a first step in that process.

Credit should also go to the legislative leaders of both parties who finally got together with the governor in the lame-duck session to approve the program. It's easy to criticize lawmakers for being too partisan and ineffective; I've done it lots of times. But the reality is that most of them want to do the right thing most of the time, and the passage of the Michigan Promise Grant is a case in point. There's no doubt that this is a step in the right direction.

Forty percent of people in the economically leading states have associate degrees or better and 33 per cent have BA's, according to the Cherry Commission. But in Michigan, the comparable numbers are 29 percent and 22 percent.

We're way, way behind our competition. Worse, 90 percent of Michigan ninth graders say they want to go to college. But only 41 percent enroll directly out of high school and only 18 percent actually graduate within four years. Plainly, there's a big disconnect between our young people's hopes and the realities - many of them financial - they face when they actually try to go to college.

So the $4,000 represents an incentive for graduates to make it through the first two years of university or community college. But is it adequate to produce a highly educated work force in Michigan?

Nope. Average tuition (not including books, room and board) at Michigan universities this year is $7,661. The $4,000 is a good first step, but is just that -- a step, not a solution for the real problem.

What's needed is a far more dramatic and effective device to unleash the human capital and talent of Michigan's young people. That's the real reason the Kalamazoo Promise has stirred up such enormous interest. Already, communities as varied as Jackson and Holland/Zeeland in Michigan, Dayton and Cincinnati, Ohio and Newton, Iowa have proposed variations on Kalamazoo's experiment.

Michelle Miller-Adams, a researcher with the W. E. Upjohn Institute for Employment Research in Kalamazoo, is writing a book about the transformative potential of the Promise. She told the Kalamazoo Gazette, "The Promise gets at a combination of important issues, like economic development, access to college and decline of urban areas."

Michigan should think seriously about taking components of the Kalamazoo Promise statewide and creating a real Michigan Promise (not this misleadingly named Michigan Promise Grant.)

Think what would happen to our state's national and international standing if we had a true GI Bill for all Michigan citizens. That is, a program where any high school graduate who maintains a good grade point average gets tuition paid at a university or community college, and any laid-off worker gets serious job retraining so they can resume a productive life of work.

Naturally, anything like that would be terrifically expensive, far beyond the state's current tight budget.

So we ought to start thinking - right now - about how to create a trust fund that could finance a real Michigan Promise. It could involve contributions from our state's great foundations. It might include proceeds from school districts selling unused schools and real property to fund college for graduates from their high schools.

The Michigan Promise account could be configured as a revolving fund in which recipients who get their college degree -- and as a result double their annual incomes -- accept the obligation to pay back to the trust fund some of their additional earnings.

Doing that would be something serious and distinctive, and make our state enormously competitive. And, more, it would demonstrate to the nation and to ourselves that we have the will to address our problems in a far-reaching, broadly acceptable way.

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Phil Power is a longtime observer of politics, economics and education issues in Michigan. He would be pleased to hear from readers at ppower@hcnnet.com. Phil Power is president of the Center for Michigan. However, these opinions and others expressed in Phil Power's columns are individual opinions and do not in any way represent official policy positions of the Center for Michigan.