Austin Community College socioeconomic impact of Austin Community College

Regional analysis Investment analysis study consists of… The study addresses two primary areas of socioeconomic impact: Economic growth in the regional economy, and; Return on investment for students and taxpayers, plus an analysis of the savings to the public at large.

p a s t s t u d e n t p r o d u c t i v i t y c o l l e g e o p e r a t i o n s s t u d e n t s p e n d i n g p a s t s t u d e n t p r o d u c t i v i t y The regional analysis comprises three main components: College operations spending, including the income effect of staff costs and college purchases for supplies and services; Income effect generated by the spending of students from outside the region; Productivity effects due to the higher earnings and increased output of past and present students who are still active in the regional workforce.

• Direct income of faculty and staff c o l l e g e o p e r a t i o n s • Direct income of faculty and staff • Associated multiplier effects The impact of college operations spending is calculated using a standard procedure, first by summing faculty and staff wages and salaries to determine the direct effect on regional income, and then applying multiplier impacts to determine the indirect effect as staff salaries and the college’s purchases for supplies and services are spent in the economy. Unlike most multiplier analyses, however, the study adjusts the gross impacts of college spending to take into account local monies withdrawn from the economy to support the college. These monies could have been used for alternative purposes if the college did not exist, and are thus not credited to the existence of the college. • Net of alternative use of funds

net contribution to regional income c o l l e g e o p e r a t i o n s gross contribution to regional income The gross (i.e., unadjusted) contribution to regional income reflects the direct effect of faculty and staff wages and salaries plus associated multiplier effects as college expenditures ripple throughout the economy. The net contribution removes the portion of total added income that would have occurred in the economy anyway if the college did not exist. These do not represent new monies to the economy and are thus excluded from the regional growth calculations. net contribution to regional income

• Spending by students from outside the local region s t u d e n t s p e n d i n g • Spending by students from outside the local region • Associated multiplier effects Students from outside the region spend money that would not have otherwise entered the local economy. To maintain the conservative nature of the results, direct local expenditures of out-of-region students are adjusted downward to account for leakage and then converted to income to determine the net impact on regional growth.

net contribution to regional income s t u d e n t s p e n d i n g net contribution to regional income This figure is reflective of added regional income, not sales. The sales figures (i.e., what students actually spend) would be much higher, but it would not account for leakage and other factors that cause monies to leave the economy. The student spending effect is an insignificant number relative to the college operations and past student productivity effects. This demonstrates that the college’s greatest impact is not in the monies that it brings in from outside, but rather in the income building effects it creates through its daily activities and the increased skills of students who work in the region.

• Higher income of students still active in the workforce p a s t s t u d e n t p r o d u c t i v i t y • Higher income of students still active in the workforce • Associated multiplier effects Each year students study at the college and enter the local workforce, bringing with them skills they acquired while in attendance. Over time these skills build up and accumulate, steadily increasing the training level and experience of the workforce. This sparks a chain reaction in which the higher earnings of students generate additional rounds of consumer spending, while new skills and training translate to increased business output and higher property income, causing still more consumer purchases and local multiplier spending. The sum of these direct and indirect effects comprises the total impact of past and present student productivity on regional income.

p a s t s t u d e n t p r o d u c t i v i t y net contribution to regional income

t o t a l i m p a c t total regional impact The total regional impact is equal to the sum of the college operations effect, the student effect, and the past student productivity effect.

s t u d e n t p e r s p e c t i v e s o c i a l p e r s p e c t i v e t a x p a y e r p e r s p e c t i v e The investment analysis focuses on benefits and costs accrued to students, taxpayers, and the public at large. From the student perspective, the study examines the higher earnings of students relative to their costs (i.e., tuition, fees and opportunity cost) From the social perspective, the study analyzes a broad collection of external benefits that accrue to the public. From the taxpayer perspective, the study measures the cost of funding the college against the returns generated by the college’s educational activities.

• Benefits—present value of increased future income s t u d e n t p e r s p e c t i v e • Benefits—present value of increased future income • Costs—tuition, fees and opportunity cost of time Students give up time and forego earnings to attend college. In return, students benefit from a lifetime of higher earnings relative to what they would have been earning had they not chosen to go to college.

s t u d e n t p e r s p e c t i v e Costs comprise the total of tuition, fees and earnings foregone. Benefits comprise the expected higher earnings of students as a result of their education.

s t u d e n t p e r s p e c t i v e return on investment The internal rate of return is simply the earning power of the money used over the life of the investment. The threshold value used in the study is 4.0% - any number greater than that indicates a positive investment.

s t u d e n t p e r s p e c t i v e benefit/cost ratio The benefit/cost ratio is calculated by dividing total benefits by total costs. If it exceeds 1.0, the investment is considered feasible. This means that for every dollar that the average student invests in the college, he or she receives a return with a cumulative value greater than one dollar over the course of his or her working career.

more than someone with a high school diploma A s s o c i a t e s D e g r e e g r a d u a t e s w i l l . . . • Earn an average of more than someone with a high school diploma • Over their future careers, Students who achieve a two-year associate’s degree can expect a lifetime of higher earnings. than someone with a high school diploma

• Education is statistically correlated with improved lifestyles s o c i a l p e r s p e c t i v e • Education is statistically correlated with improved lifestyles • This translates into medical, crime and unemployment savings to taxpayers As students achieve higher levels of education, they are statistically less likely to incur medical costs, commit crimes or claim income assistance. This translates into savings to the public.

s o c i a l p e r s p e c t i v e annual savings Health savings comprise reduced medical costs related to tobacco and alcohol abuse and worker absenteeism. Crime savings include reduced expenditures related to law enforcement, prosecution, incarceration, lost productivity, and victim services. Unemployment savings include reductions in welfare and unemployment insurance claims. annual savings

• Benefits—added tax revenue and avoided costs to government t a x p a y e r p e r s p e c t i v e • Benefits—added tax revenue and avoided costs to government The taxpayer perspective weighs government funding of the college against benefits that result in actual monetary gain to the state and local government, whether in the form of added tax revenue or reduced government expenditures. • Costs—state and local government funding

t a x p a y e r p e r s p e c t i v e Costs comprise funding received by the college from the state and local government. Benefits include added tax revenue stemming from the higher earnings of students, plus avoided social costs for health, crime and income assistance.

t a x p a y e r p e r s p e c t i v e return on investment A rate of return that exceeds the assumed 4.0% discount rate applied in the study indicates a positive investment.

t a x p a y e r p e r s p e c t i v e benefit/cost ratio A benefit/cost ratio (i.e., total benefits divided by total costs) that exceeds 1.0 indicates a positive investment.

So what does all this mean?

• Enriches the lives of students • Increases students’ lifetime income • Generates government revenue • Reduces the demand for social services The results of the study demonstrate that the college is a sound investment from multiple perspectives. It enriches the lives of students and increases their lifetime incomes. It benefits taxpayers by generating increased tax revenues from an enlarged economy and reducing the demand for taxpayer-supported social services. Finally, it contributes to the vitality of both the local and state economies. • Contributes to the growth of the economy