This ^^^^Michigan is still test optional (just like PSU) and I fully believe that it's just an abyssmal policy because grade inflation makes high school transcripts practivcally worthless. SAT/ACT are far from perfect but at least provide a context that is objective and can be easily compared between different high schools. It's been well documented how California public colleges have been suffering from their decision to not even allow SAT/ACT (not even option) as part of their admissions and how tons of students are being admitted with subpar math skills that aren't even high school level, let along college. The faculty are fighting to getting the system to go back to requiring tests for applications
And it is so obvious that one would have to be excessively "not bright" - or some type of weird ideologue - OR generate self-serving benefits by ignoring it (always tend to go with the last one, though I have seen all three up-close-and-personal) to argue otherwise.
Interesting that at many educational institutions it was the faculty that lead the charge for the "banning assessment test scores" (or, probably more accurately, the most vocal portion of the faculty - which may have been a minority slice)
(Though, one thing to keep in mind wrt your post. At Michigan specifically most kids still submit test scores anyway. Michigan is very selective. And their enrollees absolutely knock it out of the park in that regard. The opposite of PSU in both regards.
And many of the uber-selective universities - with small enrollment numbers each year - go so in depth in the admissions process that they honestly don't need "test scores" in order to fully vet the capabilities of those they extend admissions offers to - but that is only a handful of schools)

