May 11, 2012 | last updated May 15, 2012 3:27 pm

Study: Higher Ed Investment Returns Exceed Casinos, Tax Cuts

Courtesy of scottchan

A 40-page study discussed at the capitol Thursday concludes investments in public higher education diplomas and college certificates might provide the best chance at improving the Massachusetts economy, but state lawmakers have no plans yet to increase funding to levels recommended by the study's authors.

"I think the challenge before us is how do we fund this," said Joint Committee on Higher Education Co-Chairman Rep. Thomas Sannicandro, discussing a paper by two UMass academics that argues state funding of higher education should be nearly doubled.

The paper, "Economic Impact of Investment in Public Higher Education in Massachusetts: Short-Run Employment Stimulus, Long-Run Public Returns," argues that an $800 million boost to higher education would produce an extra 11,200 graduates per year, lead to a roughly $740 million gain in income tax revenues, and generate a better payoff than that same investment in casinos, health care or a tax cut.

"In other words, a dramatic increase in the state's investment in public higher education is an exceptionally good deal for the entire commonwealth and should be vigorously pursued by policy makers," the study concludes.

Speaking before lawmakers on Thursday morning, the paper's authors Michael Ash, an economics and public policy professor, and Shantel Palacio, a public policy and administration graduate student, said public higher education is underfunded by $800 million. Their paper assumes an increase in higher education spending of that amount could be funded by a tax increase, an idea not currently on the table among Beacon Hill leaders, with resulting job increases outpacing those lost due to the tax hike.

According to Ash and Palacio, an $800 million spending boost to higher education would produce between 11,766 and 13,470 jobs – both directly, through the hiring of professors and construction workers to build new buildings, and indirectly by creating jobs for vendors and others, according to the study. After accounting for jobs lost due to the tax hike, the net new jobs from the investment would be 6,580 in the first two years, with a net increase of 8,284 in subsequent years.

Casinos would produce about 1,200 or 1,300 fewer jobs, even accounting for the vendors and others who would benefit from the investment, the paper states. Another $800 million spent on health care would only do slightly better than casinos, and tax cuts – which would not create any jobs directly – wouldn't even do half as well at job creation as the higher education spending, according to Ash and Palacio.

Palacio and Ash also argued that beyond the direct stimulus of $800 million, the new college graduates would cost less and pay more to the state.

"This graduate will pay more taxes, since his or her income will be higher, and will put less of a burden on public services," the paper says. "No other use of a comparable outlay of public funds can match this one in terms of how it repays the investment."

The House's fiscal 2013 budget raises higher education funding to $988 million, up 6 percent from $929 million last year but less than the $1 billion budgeted before the 2008 market crash that led to the Great Recession.

In fiscal year 2009, Massachusetts per capita higher education funding of $196 per person was 33 percent below the national average, leaving the state ranking 45th among the 50 states, according to a December 2011 fact sheet produced by the Public Higher Education Network of Massachusetts.

"While we have much to be proud of in Massachusetts, there is still much more that we can do," said Higher Education Co-Chairman Sen. Michael Moore.

The question of what to do next is as much about higher education as it is about economics.

According to Sannicandro, after the G.I. bill funded veterans' college educations, the percentage of Americans with college degrees jumped from 6 percent to 20 percent.

"That educated workforce is what made us a powerhouse in the world," said Sannicandro.

The study concludes jobs in higher education, generally pay better than in casinos and construction and are roughly on par with the pay in hospitals – not including doctors. And those professors and teaching assistants produce more college graduates, who boost the economy by drawing on fewer social services, earning more income and staying out of jail more than the population as a whole, according to the paper.

Over a lifetime, the state spends about $100,000 on welfare, unemployment compensation and jail time for the average high school graduate, but only about $34,000 on someone who has received a bachelor's degree and $54,000 for someone with an associate's degree, according to the paper.

The paper claims that for the roughly $49,000 it costs for someone to attain a degree from a state school, the graduate adds double that back to state coffers. To the state, the difference between someone with a college degree and a high school diploma is $198,000 over that person's lifetime – in tax bills for the graduate's higher earnings as well as the reduced draw on public services such as welfare and Medicaid.

The list goes on for the benefit of a college education – less cigarette smoking, lower divorce rates, greater dependability.

The study was prepared with a grant from the Massachusetts Society of Professors.

Image courtesy of scottchan

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