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Friday, March 11, 2016

'Spending on Public Higher Education Overlooks Net Benefits as Investment in State's Future'

Whether or not the estimates are precise or directly applicable to other states, the broader point is noteworthy:

Spending on public higher education overlooks net benefits as investment in state's future, Eurekalert!: ... the state of Illinois continues to underinvest in public higher education. But considering higher education funding as an investment that lowers state welfare and prison costs, generates tax revenues and leads to economic growth in the future -- and not as mere consumption spending -- could reframe the debate, according to an article by ... Walter W. McMahon, an emeritus professor of economics and of educational organization and leadership at the University of Illinois. ...
Published in the Journal of Education Finance, the article develops the total return of public education relative to the full costs to the state of Illinois, the key criteria for determining whether there is under- or over-investment for the most efficient statewide development.
McMahon concluded that public education in Illinois contributes to investment returns of 9.5 percent for K-12; 15.3 percent for community college; and 13.4 percent for university, respectively, for every dollar that's spent -- returns that are well above the 7.2 percent the money would have earned if invested in an index fund that tracked returns of the S&P 500, McMahon noted.
(Updated calculations based on the newest earnings data at each education level, corrected for dropouts and other factors, show returns relative to costs of 12.9 percent at two-year institutions and 12.3 percent at the four-year institutions.)
"These earnings-based and total social rates of return both show that higher education is economically very efficient - in fact, more efficient than the average corporation in the S&P 500," McMahon said.
This measure of efficiency trumps any possible overspending on administrative costs cited by critics...
"All told, the state of Illinois' education investment pays for itself every 2.3 years in state budget savings alone."
The return to the state is considerably larger if nonmonetary outcomes are considered.
"A major opportunity being missed is estimating the effects of higher education on state tax revenues and on budgeted state tax costs for health care, welfare, child support and the criminal justice system," McMahon said. "Beyond these state budget savings, I also found about a 30 percent total return that includes these wider health and other benefits to statewide development." ...

    Posted by on Friday, March 11, 2016 at 12:15 AM in Economics, Education, Universities | Permalink  Comments (23)


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