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This report calculates the financial costs incurred by Michigan businesses and institutions of higher education when students leave high school without learning the basic skills. Five different strategies are used for determining this cost, they are: direct expenditures for remedial education by Michigan institutions of higher education and employers; re-calculating the cost to employers; the cost of producing a successful high school graduate; using National Assessment of Education Progress scores to estimate the number of students lacking basic skills; and including a return on investment. The report conservatively estimates that the Michigan economy suffers a total annual loss of between $311 million and $1.5 billion. The best estimate, from averaging the results from all five calculation strategies, is $601 million per year. The report discusses the best estimate of the economic cost of remediation, examines why so many students require remedial education, and considers what can be done. The three appendixes include: "Educational Failure and the Need for Remediation: The Human Cost" (Thomas F. Bertonneau); "The Problem is Clear, but Solutions May Vary" (David W. Breneman); and "Additional Costs, Causes, and Policy Implications of Remedial Education" (Herbert J. Walberg). (SM)