NC education institutions boost state economy

By Daniel Hall – dhall1@unca.edu – Staff Writer | Feb. 25, 2015 |

According to the results of a recent economic impact study, unveiled on Feb. 18, North Carolina’s higher education institutions have been responsible for tens of billions of dollars in additional state income.

The study, conducted by Economic Modeling Specialists International, found that North Carolina state universities alone were responsible for $27.9 billion of state income during the 2012-13 fiscal year.

The study had two primary components. First, it evaluated the total economic impact of North Carolina’s various higher education institutions – that is, how the state’s economy was influenced by their presence. Then it evaluated the institutions as an investment asset, determining whether it made sense to continue investing in the institutions to the same extent.

The institutions were divided into three categories – community colleges, state universities, and independent universities – with a detailed breakdown for each, along with a summary of their total impact: $63.5 billion in added economic value, according to the report. This is roughly equal to all manufacturing in North Carolina combined, or over a million jobs.

“What the results will tell you is that were it not for the presence of the 110 institutions in North Carolina,” said Kjell Christophersen, president of EMSI, “the economy would be substantially smaller.”

The UNC system holds the smallest share of those institutions, with only 16 campuses, but generated over 40 percent of the additional state income, according to the report.

In calculating that impact, numerous factors were considered – student and faculty spending habits; operational costs; research and construction costs; and the long-term financial benefits of higher education. All these findings are included in a comprehensive 90-page report, available online at the UNC website.

Christophersen said the study was discriminating in its considerations, focusing specifically on new money brought into the state by higher education institutions. For example, the spending habits of out-of-state students – groceries, clothes, and other expenses – were included in the calculation, because they brought in money that would otherwise not have been spent in North Carolina. By the same token, in-state student spending was excluded, as that money presumably would have been spent in North Carolina regardless.

More than half of the economic impact of the UNC system comes from its alumni, according to the report. That contribution is $17 billion, a valuation of the economic benefits of having a more skilled workforce – derived from both increased personal wages of alumni, and the increased profits they bring their employers.

Then there was the investment analysis, a cost-benefit breakdown from several perspectives.

“Does it make economic sense for the students to attend?” Christophersen said. “And then, the second thing. Does it make economic sense for the taxpayers to continue to fund the public institutions to the extent that they currently do?”

The following figures are for North Carolina state universities only, not for all higher education institutions. The figures from those institutions are available in the full report.

The total investment by state university students was calculated to be $6.1 billion. This sum factors in the opportunity cost, which is money and time foregone by attending university rather than working a job, as well as out-of-pocket expenses. But the potential return, earned through a lifetime of improved wages and benefits, was projected to more than triple that initial investment, with total student capital assets valued at $19.2 billion.

As expressed by the report, each dollar students spend toward their education in the present maybe projected to yield $3.10 of cumulative wages in the future.

Then there is the taxpayer investment analysis. In the future, as students earn higher wages after graduation, they pay higher income tax. Their employers will also pay more taxes as they have need of more services and supplies. As students become more employable and live healthier lifestyles, the demand for welfare, unemployment, and healthcare benefits reduce, and the state is able to use the resulting savings for other purposes.

The total value of these savings plus the increased tax revenue was calculated to be nearly quadruple the taxpayers’ investment of $2.9 billion. The money can then be spent on roads, schools, health care and other services. Presumably, taxpayers benefit from these improvements – cumulatively valued at nearly four times the tax amount originally contributed.

Then there is the societal perspective. The report asserts that simply by being employed, students will improve the state’s prosperity. Higher incomes mean more money circulating in the economy. A more skilled workforce has greater productivity. A healthier, better educated population yields lower rates of crime and unemployment. The resulting savings and benefits were valued at $106.8 billion by the report – nearly a nine-fold return on the initial investment of $11.9 billion, which is calculated by considering the opportunity cost to society in investing in universities, as opposed to roads, hospitals, or societal infrastructure and systems.

The report concludes that investing in higher education is an attractive prospect for students, and the presence of state universities positively influences the state’s status and economy.

Mary Grant, chancellor at UNC Asheville, said this demonstrates how important higher education is to the future of North Carolina.

“This study makes real for all of us the extraordinary long-term benefits to North Carolina of investing in top quality higher education,” Grant said. “The financial return-on-investment is substantial, but it is really only part of the story. Graduates from all of our institutions are making a crucial difference in the civic and social fabric of our society, every single day.”

 

 

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