High Economic Impacts of Higher Education

Universities and colleges contribute significantly to state and local economies across the country. For most institutions the magnitude of their economic impacts has not been calculated. This uncertainty may contribute to reduced support from state governments when budgets are tough to balance. According to a member of the Arizona Board of Regents, Taylor Robson, “In the public policy arena, education is sometimes looked at as an expense and not an investment.”

However, a number of higher-ed institutions have begun to conduct economic impact studies and the results are startling. For example, a new report found Penn State contributes $11.6 billion to Pennsylvania’s economy, where 95 percent of the State’s residents live within 30 miles of a Penn State campus. In Arizona, its three public universities are responsible for $11.1 billion in economic output and more than 84,000 jobs.

Smaller institutions have a bigger impact

Smaller and more rural institutions are feeling the financial pinch more than others. They do not have the large endowments that are a financial security blanket for major institutions. They are experiencing competition from community colleges, which are expanding low cost offerings in suburban and urban locations. Furthermore, online education continues to expand, intensifying competition for students. With enrollment dropping as a result of intensified competition, many are feeling a severe financial pinch.

However, few people realize that smaller institutions generally have a disproportionally larger impact on their local communities. A study by Dr Paul Holden of the Enterprise Research Institute, a Gunnison Colorado based consulting company, determined the total direct and indirect economic impact of Western Colorado University to be over $70 million, equivalent to 20 percent of the net earnings of Gunnison County residents. The findings confirm the huge importance of rural institutions of higher learning to the communities in which they are situated.

More data and better models

Access to more data and improved economic modelling techniques are necessary tools for conducting economic impact analysis. IMPLAN is one example of a data model that estimates direct and indirect outputs, job creation, and tax revenue generation. Quantifying the economic benefits of four-year institutions will place their contributions to local economies in perspective and would provide key inputs into developing effective growth strategies.

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