As state’s Higher Education officials tout economic impact, some doubts raised
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Published: 16-Apr-2013

OKLAHOMA CITY-  A study for the State Chamber of Commerce has concluded the Oklahoma public system of colleges and universities is both a bargain and a wise use of taxpayer resources. However, the analysis did not include a look at the number of sites, possible administrative efficiencies and other traditional concerns of critics. 

The State Chamber study conducted by Battelle Technology Partnership, reached several positive conclusions, including an estimated return on investment of $4.72 for every $1 of tax funding. 

Joshua Hall, analyst at the Center for College Affordability and Productivity (CCAP), challenged that high multiplier, observing, "Government spending does not come out of thin air. Every dollar spent by state government comes out of the private sector at some point. A dollar of public spending is estimated to cost anywhere from $1.25 to $1.50 to raise."

Hall told CapitolBeatOK, "Ignoring these costs in any study of the efficacy of public spending is a surefire way to inflate the benefits." Hall and other researchers have said that after taking the costs of taxation into account the net effect of taxes spent on Higher Ed is zero, “at best.” 

In an interview with CapitolBeatOK, Battelle’s Martin Grueber said the projected $4.72 return on each dollar spent is "pretty strong” in comparison to other states. Asked if the study had looked at the positive economic effect if some of that money were left in the private sector, Grueber said:

"We don’t look at that" for the projects we do. We were trying to find the economic impact of those dollars spent in public institutions of higher education and play that out. We did not look at the fiscal stream, as such, but we were trying to get a handle on the benefit that comes from money spent by the students and families.”

In a recent study focused on Tennessee, Hall looked at all costs for taxation (deadweight, compliance, enforcement, administrative), and concluded collection costs can reach half of every dollar raised. He told CapitolBeatOK, “The marginal cost of public funds is at least 25 cents on the dollar.” 

As for the direction in which federal research funding for Higher Ed is headed, Grueber said in discussion with CapitolBeatOK, “Obviously due to sequestration there is presently a large impact. Analysts in my profession are thinking there might be an 8 to 12 percent drop in federal funding for research over the next year or so. It all depends on the agency – Agriculture will be different than Energy, and so forth.”

This month, the State Chamber press release touting the Battelle analysis said every dollar in state funding draws an additional $2.24 in federal funding. 

Oklahoma has more than 25 institutions of higher education, delivering services at nearly 50 sites. Four-to-six-year graduation rates at some of the institutions are extremely low. Even at the state’s finest institutions, Oklahoma University and Oklahoma State University, the four-year rate is weak, but improves notably after six years on campus.

In response to CapitolBeatOK’s question -- “Do we need this many places to deliver the value” hoped for in a college and university education? -- Grueber said, “We made no assessment of the structure of Higher Education.”

Fred Morgan, president of the State Chamber, said finding qualified workers is among the top challenges faced by the business community.  Among the Battelle study’s conclusions:

Public higher education is the key provider of higher education services, enrolling more than 190,000 students and awarding more than 30,000 degrees annually.

Nearly 90 percent of Oklahoma public higher education graduates live and work in the state one year after graduation, and more than 70 percent still remain in the state five years after graduation.

* Higher education system graduates enjoy higher average incomes, increased financial security, and more job satisfaction, and are less likely to access the welfare system than those who do not pursue higher education.

* Public universities have a strong and flourishing presence in advanced research, conducting $360 million in annual research and growing their research volume at a pace that exceeds the national growth rate.

The report noted, “At the current time, and into the foreseeable future, it is hard to overstate the importance of education, and especially higher education, to economic and social progress in the U.S. In a modern, knowledge-driven economy the most valuable asset a state can possess is a well-educated and skilled populace.”

"The State Regents are very pleased with the results of the Battelle Study,” Chancellor Glen D. Johnson said at a recent Capitol press conference. “Our state system of higher education continues to produce graduates who live and work in Oklahoma, while our taxpayers continue to receive a substantial economic return from higher education. This study further confirms that public higher education is an invaluable resource for our state and our citizens.”

OU President David Boren and other advocates have pressed for new increases in tax sending on the system, but critics say analysis proves the system will spend every penny it receives, with or without accountability. 

One critic of Battelle-style analyses, Dr. Richard Vedder of Ohio University, told CapitolBeatOK, "Econometric analysis I have done suggests that the relationship between state appropriations for higher education and economic growth is actually negative -- resources are taken from competitive private enterprise driven by market discipline and given to an inefficient sector sheltered from such discipline."

You may contact Patrick B. McGuigan at Patrick@capitolbeatok.com and follow us on Twitter: @capitolbeatok.


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