Cross posted at CalChamber.com.
California has become notorious for its competitive economic disadvantages, including the high cost of labor, uncertainty from litigation and regulatory delay, and high state and local taxes. Much of the debate about improving our economic performance has been over how to reduce these disadvantages.
A welcoming business climate is indispensible to draw grow jobs in the state. But perhaps more important to California’s long-term prosperity is a historic competitive advantage that is slipping away: our once-world class system of postsecondary education.
Higher education, and in particular the public four-year institutions, the University of California and California State University, makes three irreplaceable contributions to California’s well-being: a more highly-skilled work force to meet the needs of the economy of the future; better economic opportunity for high school graduates; and more innovation that spins off into increased opportunities and better jobs.
As the Governor and Legislature ponder whether higher education should continue to suffer disproportionate reductions in their state revenues to help the state address its persistent budget deficit, the elected leaders should pay close attention to a recent report from the Campaign for College Opportunity.
A nonprofit research and advocacy organization, the Campaign found an extraordinary return on investment for state revenues provided to higher education in California.
- For every dollar California invests in public higher education, it will receive a net return on investment of $4.50. That’s a 450% return on investment.
- The return is double for those who complete college–$4.80–than for those who enter but don’t obtain a degree–$2.40.
- Past graduates of UC and CSU return $12 billion annually, well above the current general fund expenditures for the UC, CSU and California Community College systems combined.
- Californians with a college degree will earn $1,340,000 more in their lifetime than their peers with only a high school diploma.
- By entering and completing college, the average Californian will spend 4 years less in poverty, reducing the expected number of years they receive cash aid by more than 2 years.
“The report demonstrates the strong investment value of the state’s expenditures on higher education,” said Allan Zaremberg, President and CEO of CalChamber. “California’s leaders must ensure adequate funding of our colleges and universities to help secure our economic future.”
This report provides a guidepost for state leaders wrestling with securing future economic prosperity and stable state budgets. When average incomes for Californians increase as a result of more-skilled and better paid workers, it is natural that available tax revenues would also increase.
According to the Campaign, translating the income advantage earned through college entry and completion into revenue finds that transitioning between high school graduation into college yields the state nearly $30,000 more in revenue over the course of the individual’s work-life. If that person earns a BA or higher degree, it garners the state $108,000.
The state also reaps savings, with differences in lifetime years in poverty with college attendance yielding savings of around $5,000, and a college degree yielding savings of $11,000 over the course of an individual’s work-life. Savings from decreased incarceration rates provide savings roughly double that in size, with a $10,000 difference between high school graduates and those with some college, increasing to a $23,000 difference for those who earn their BAs.
In total, including lower expenditures and higher revenues, college entry ultimately yields around $45,000 to the state, and a bachelor’s degree yields the state more than $140,000 per individual.
Consecutive years of budget cuts – more than a billion over the past two years and probably even more should a tax increase on the ballot fail – has weakened California’s higher education systems, leading to tuition hikes and weakened faculty recruitment prospects.
According to CSU Chancellor Charles Reed, “For the California State University, our dollars are the same as we had in 1996, but we have 90,000 more students today. California’s economic recovery is based upon funding higher education, and it has been neglected for the past several years. And if the governor and the Legislature don’t start funding higher education, California is not going to recover from this slump in the economy.”
California’s Economic Payoff: Investing in College Access & Completion, was conducted by researchers at the Institute for the Study of Societal Issues at University of California, Berkeley, and commissioned by the Campaign for College Opportunity.
The study was co-released by CalChamber and the California Civil Rights Coalition.
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