I suppose it would be too much to ask a University System to do something as basic as a literature search to find out what the actual economic impact of higher ed spending is on a community. So I did a little one for them and, as usual, the result weren’t quite what I expected.
*If these economic impact studies were conducted at the level of accuracy most institutions require of faculty research, their claims of local economic benefits would not be so preposterous, and, as a result, trust in and respect for higher education officials would be enhanced.
*The purpose of many of these economic impact studies is to articulate the value of an institution of higher education, including spillover effects, often to help the institution compete for state funding (or resist cutbacks), maintain tax-exempt status, obtain a subvention, fend off criticism, or bolster fund-raising.
*Occasionally, colleges and universities engage in a sleight of words that exaggerates the multiplier. The crafty statement that “…the University of Maryland generates $5.93 of economic activity for every dollar appropriated by the General Assembly, for a total statewide effect of nearly $1.8 billion” may be accurate, but it is misleading. It implies that every dollar spent on the university returns $5.93 to the state annually, for an annual rate of return on state investment near 500 percent. When Treasury bills return under four percent a year and stock returns of 15 percent bring joy to investors, a 500 percent annual rate of return sounds too good to be true. And, of course, it is, because it attributes all of the return from the university's myriad activities to the small portion of its budget contributed by the state. It implies that absent the state's contribution, there would be no University of Maryland, and nothing would move in to replace its services, not Towson State, Johns Hopkins, or Hood College.
*Regarding presentation, studies of public universities should stop claiming “For every $1 the state legislature spends, the university returns $X dollars to the state…” At best such statements are meaningless. At worst, they may delude decision-makers into thinking (incorrectly) that the marginal return on investment in higher education is several orders of magnitude more than returns on other public investments. If the returns to higher education were as high as these statements imply, states and the private sector would be building universities frantically.
The U.S. Government has estimates of the multiplier effect (dollars returned per dollar spent) already available for various sectors of the economy. (No need for UB/SUNY to expensive, misleading self-studies.)
Note that the U.S Government estimates a return of (dollar invested plus) $0.70 for each dollar spent on education and health services. Not even close to the fudged, self-serving data generated by UB/SUNY.
The massive tax payer investment proposed by UB2020 could hardly have picked a worse target sector to concentrate on. The only thing that underperforms Education and the Health Services spending planned for by UB2020 is Banking and Financial services.
* Excerpts from Economics of Education Review Volume 26, Issue 5, October 2007, Pages 546-558
Comments for this post
Posts
