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Higher education significantly impacts the states’ economic strength. However, states are failing to fund higher education appropriately. Nowhere in the developed world, (the 36 nations that most resemble us) is public education so expensive for their students. In most countries that have leaped over us in their rate of college completion (US was ranked first; now twelfth) higher education is free or very low cost.

We cannot continue to follow this downward trend in college completion rates because we risk failing to (a) maintain our infrastructure, (b) educate our children, (c) create new goods & services, and (d) maintain the current powerhouse economic status of the United States. Presently, we outsource certain technical services (not because of low salaries overseas), but because we simply do not have enough qualified people. This downward trend will continue unless we in higher education act now.

Traditional Universities (TUs) perform more than Capitalized Universities (CU’s) to foster economic and social development. While CUs resemble TUs in that they offer courses and issue degrees, TUs conduct research vital to our national security, our economic welfare and our leadership in technology word-wide. TUs also produce poets, musicians and cultural scholars, which CU’s do not. Education is more than preparation for a given career. If only a career is desired, the process is more properly referred to as “training”.

Universities are said to provide a public good (income to the states), as well as a private good (the increased in personal income for their graduates). If the state contributes only 17% of the higher education cost as they do now, then the public good is riding on the back of the private good and tilting the balance so that inviduals are shouldering most of the burden.

Let’s take one state that has abundant data and cite it as an example. Universities in Texas bring $33.2 billion a year in income to the state. Considering that the system receives approximately six billion annually in state general revenue and local property taxes, every dollar invested in the state’s higher education system eventually returns $5.50 to the Texas economy.

According to the Texas Controller of Public Accounts Susan Combs “This is a remarkable return, even for a high-stakes technology startup. But when it comes to the Texas higher education system, the stakes are much higher. For here, we are investing in our most important venture—the future of young Texans.”

I am suggesting that a state likeTexas should increase its investment in higher education. Doubling the investment to twelve billion would be great but even one billion would be a good start. This investment must be targeted to reduce tuition, provide opportunities for more students to access and succeed, and improve and expand programs of research and development in critical areas of need. Assuming that the additional investment yields the same per-dollar return, Texas would garner an additional 6 billion in income. This would make Texas the destination for US-based future technologies, just about the time that the oil that has fueled Texas growth for a hundred years, would be exhausted.

Not all states and universities are as productive as Texas universities, some are even more productive. Take the case of UCLA. An updated report by the Los Angeles County Economic Development Corporation shows that UCLA-related economic activity generated business revenues of $9.3 billion in greater Los Angeles alone during fiscal year 2005-2006.

That year, UCLA had an operating budget of $3.6 billion, (see above graph) of which only $626.4 million (17.4 percent) was provided by the state. Regional spending by the university, its employees, students and visitors totaled $3.9 billion, and spawned another $5.4 billion in indirect activity through goods and services supplied to the university. Statewide, UCLA adds a further $535 million in business revenues. This brings university-related economic activity throughout California to $9.9 billion. Therefore the return rate to the state is nearly 16 times its investment. No other (legal) investment in the world can compare with this.

These are examples for just one university and one state. A 16% increase in support to universities, let’s say to 33% of expenditures, will most certainly yield the same return (if properly targeted) and would stop or reverse the trend in tuition, so that more families can afford state-sponsored higher education without going broke or burdening their children with unconscionable debt. I must say it again, this increasing the burden of tuition on students is equivalent to sentencing them to a worse economic life than their parents enjoyed, with less education.  That to me is the end of the American dream and its reality.

Next post: What does higher education actually cost?

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