Frank,

That sounds exactly like the same problem in California with the massive gap between the UC system and the CSU system.

Legislators and even parents (voters) seem to prefer an elite and extremely selective (meaning turns even their own kids away) flagship system, and then 3rd tier below it. There really is a large demand for that 2nd tier, but the 3rds and 1sts don't want it. So the kids who don;t get into the flagship, or who can't get the major they want (usually STEM related) leave the state. These are highly productive people in the future, and the statistics show that if they leave for college they are far more likely not to return when it comes to work or establishing new businesses.