"Public Colleges Try to Show Their Value to States, But Not Everyone Is Convinced," The Chronicle of Higher Education, May 9, 2003, 26.

By WILL POTTER

In these tight budget times, public colleges feel the need to prove their value to state legislators. But instead of highlighting higher education's basic virtues, many institutions are summing up their assets in dollars and cents.

The colleges are commissioning expensive, complicated economic-impact studies to trumpet their positive effect on the economy and win the favor of legislators facing tough spending decisions. Some people have called the studies self-aggrandizing, and others wonder what effect the reports can have, even if they are accurate. Legislators in many states say that no matter how many studies they receive, no public agency should expect to be exempt from budget cuts this year.

"There is an increased interest [in economic-impact studies], driven at least partially by the fairly persistent budget crisis across the country," said David J. Ward, president of NorthStar Economics, a consulting and research company in Wisconsin that conducted studies for the University of Wisconsin System. "A lot of the colleges are facing a need to have some kind of economic message."

Researchers put together the studies this way: They tally up university spending (on small things like toilet paper and computers and major projects like new buildings). They estimate faculty, student, and visitor spending (through survey results or other methods). Then they factor in a "multiplier effect," which accounts for additional spending as the university's dollars make their way through the economy.

Some studies also add in other benefits. Everett and Edmonds Community Colleges in Washington State, for example, report that they reduce crime costs by $1.6-million per year because of a more-educated public. They also say the community colleges reduce the number of people who smoke and abuse alcohol in the area, saving the county $2.2-million in health-care costs.

Pulling Out All the Stops

These studies are not new, but they are being touted more often these days as college officials pull out all the stops to avoid massive budget cuts. Still, the studies themselves are pricey. They can cost upwards of $50,000, said Kjell A. Christophersen, a top official of CCBenefits Inc., an Idaho-based research company. The company charges about one-tenth of that for community colleges, Mr. Christophersen said, because the Association of Community College Trustees paid the company to build a research model that can be reused for two-year colleges around the country. The company has done more than 300 economic-impact studies of community colleges since 2000.

"I anticipate all colleges will eventually buy into it," he said. "It's a very good deal for them."

All 19 of New Jersey's community colleges did so, and paid the company $85,000 for several studies: $5,000 for a statewide report, and $5,000 from each of the 16 colleges that opted to pay for additional, local studies. It was the first time the colleges conducted the studies, and it came at the right time, said Lawrence A. Nespoli, president of the New Jersey Council of County Colleges. Colleges there are facing state budget cuts of $8-million (5 percent of their $160-million in state operating aid).

The statewide report found that the New Jersey economy gets $18 for every dollar the state spends on the community colleges. The colleges' graduates each earn $400,000 more over their lifetimes than do workers with only a high-school diploma, and 95 percent of them stay in state and further contribute to the economy, the report says.

"I don't know if we'll be blatant about it, but we'll do a rollout of this," Mr. Nespoli said. "This is a one-two punch. Colleges will use it in talking with local officials, and we'll use it in talking to the Legislature. I'm biased, of course, but this is pretty powerful stuff."

The University of Wisconsin has been using such studies for some time, said John D. Wiley, chancellor of the Madison campus. Its own researchers have conducted studies in the past, but this year administrators paid NorthStar $129,000 (using private money from the University of Wisconsin Foundation) as a way of "adding credibility."

The report says the system, which faces some $250-million in budget cuts, benefits the state economy by adding $4.7-billion to it each year, or 2.7 percent of the gross state product. The system is responsible for 70,000 jobs. Mr. Wiley says these numbers are comparable to past studies, and show the importance of spending money on higher education.

"It's nothing more than common sense," Mr. Wiley said. "Everyone knows there is a substantial impact on the economy of the state. This just quantifies it and makes it real."

That reality is sometimes questioned. Some critics say the studies inflate a college's impact on the economy.

John J. Siegfried, a professor of economics at Vanderbilt University, said most of these studies are "decent but not accurate." He calls reports that claim $26, $18, or even $4 in economic returns for every dollar spent on higher education "preposterous." These high rates of return assume that nearly all of the money is spent locally, on locally produced goods, he said. This is rarely the case. A university construction project may help local contractors, for example, but a lot of the materials used for the building come from out of state.

Mr. Siegfried, who has researched economic-impact studies for new sports arenas, said budget pressures are making colleges behave like sports teams.

"Football and baseball teams all hire consulting firms to do this, too," he said. "They pay a lot of money, and the firms jimmy up a number that is put out as authoritative. The next step for sports teams is telling taxpayers that they should put money toward this."

Sports teams have generally used their studies successfully, he said, because such reports are "easy to push past people." But it remains to be seen how legislators will respond to the higher-education studies in the face of mounting budget deficits and interest groups all clamoring for a shrinking share of available state funds.

Colleges that have paid for these studies say they do have an effect on politicians, but they also recognize that at least some cuts may be unavoidable. In difficult budget environments, governors base their decisions on performance, said Kristin Conklin, senior policy analyst for the National Governors Association. If these studies are independent, and show how the institution works to develop local industries, governors will pay attention. However, most of the colleges pay for broad studies that come back glowingly positive, she said, and this raises red flags with governors.

"It's when they're slick, university-touting publications that it's taken with a grain of salt," Ms. Conklin said. "'Consider the source,' as they say."

[Sidebar]
HOW MUCH ARE PUBLIC COLLEGES WORTH?

More public colleges are using economic-impact studies to show that they bolster their state economies and that, as a result, they should be spared from budget cuts. The studies often vary in their methodology and scope, and some colleges have been accused of exaggerating their economic clout. Here's a sampling of the reports:

Michigan's public colleges

* The state's 15 public universities contribute $39-billion each year to the state economy, nearly 13 percent of the gross product.

* For each dollar the state spends on operating costs for the universities, Michigan's economy gets $26 back.

New Jersey's community colleges

* For each dollar New Jersey spends on its 19 two-year colleges, the state's economy benefits by $18.

* Students, faculty and staff members, and graduates of the colleges bolster the amount that workers in the state earn each year by $6.3-billion and help add $16-billion to the sales totals of New Jersey businesses.

Tennessee State University

* The university and its students, employees, and visitors contribute $493.5-million each year to the Nashville area's economy.

* For every dollar spent by the university, an additional 84 cents in spending is generated by the businesses that sell products and services to the university.

University of Arizona

* The university's research programs brought in $285.1-million in grants, contracts, and gifts. The money paid for nearly 3,500 jobs.

* Spending related to carrying out the university's research accounted for $384-million in sales statewide.

University of Wisconsin at Madison

* The university contributes $4.7-billion each year to the state economy, about 2.7 percent of the gross product.

* The campus generates $338.8-million in income, sales, and property taxes each year.