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Community colleges provide
big payback for taxpayers

Bang for the Buck

At a time when the state's belt is tightening, the question of the hour is whether the state is making the best use of taxpayer dollars. According to a study by the Texas Association of Community Colleges (TACC) released in June 2002, the state is getting its money's worth from its community colleges.

Community colleges are post-secondary institutions that offer a variety of educational programs, including certificates, associate degrees and individual courses that students can transfer to four-year colleges or use for professional or personal enrichment.

The American Association of Community Colleges reports there are 1,166 community colleges in the United States, serving more than 10 million students. The average annual tuition for community colleges nationwide is $1,518, compared with an average of $3,754 for a four-year public college according to the College Board, creator of the SAT.

Closer, cheaper
The TACC says Texas has 50 community college districts, serving almost half a million students--461,236 in fall 2001. Ninety-five percent of the state's population is located in a community college service area. In 2002-03, the average cost for tuition and fees at a community college for a Texas resident is $977, compared with $3,152 at a Texas public university, according to the Texas Higher Education Coordinating Board (THECB).

Dr. Ramon Dovalina, president of Laredo Community College and co-chair for the Comptroller's new higher education tuition plan, TexasNextStep, says that community colleges fill a different educational niche than four-year institutions.

Dovalina says community colleges have the advantage of tailoring their programs to the specific needs of the areas they serve. The THECB says that kind of flexibility, the lower cost and the fact that community colleges are closer to home have led to increased enrollment, especially in the last few years.

"In recent years, it's really picked up," says Ray Grasshoff, public information officer for THECB. In 1996, enrollment statewide for community colleges was 407,556. By 2001, enrollment was 461,236, a 13.2 percent jump. Dovalina says that Laredo Community College exemplifies that growth.

"I think we're going to have 3 to 5 percent [growth] for the year," he says. "I expect to have record enrollment for the fall."

Big payback
The TACC report aimed to show what community colleges add to the economy compared with the money the state spends to support them. Other studies have determined the economic impact of higher education in Texas. At least five previous studies have covered the subject, including a December 2000 report released by the Comptroller's office, The Impact of the State Higher Education System on the Texas Economy.

The previous studies concentrated on specific institutions or all institutes of higher education in the state rather than community colleges specifically. The 2000 Comptroller study, which considered all institutions of higher education, determined that for every dollar the state invested in the Texas higher education system, the Texas economy benefits by five dollars.

The TACC study, The Socioeconomic Benefits Generated by 50 Community College Districts in Texas, conducted by researchers at CCBenefits Inc. for the association, focused on community colleges specifically and, unlike previous studies, considered the trickle-down benefits of educating Texans.

"We looked for a [research] model that we thought would tell the complete story," says Rey Garcia, executive director of TACC. "We did a study about eight years ago, but the only thing that we looked at was wages and salaries."

The 2002 study estimated what the day-to-day operations of the schools add to local economies by providing jobs and spending on electricity and similar operational expenses. It also assessed the indirect impact of community colleges by looking at such factors as how community college-educated students in the work force affect the economy and how much taxpayers save from the reduced crime, welfare and unemployment. It also looked at the improved health that results when citizens become more highly educated. Researchers call these savings avoided costs.

The price tag
Colleges receive both public funds, including local taxes, state aid and federal grants, and private funds, such as tuition and interest on investments. The study reports that total funding for community colleges in 2000 topped $2 billion. Public funding accounted for almost $1.5 billion of that amount, $1.3 billion of which came from state and local taxpayers.

Texans get a big return on that investment, according to the report.

Texas community colleges paid more than $1.2 billion in wages and salaries for more than 51,500 full- and part-time employees. As employees spent their wages, that spending generated income in the community. That additional income, combined with the operating and capital expenditures by the colleges, added nearly $1.9 billion to the Texas economy.

An additional measure of impact is the earnings of previous students now in the work force, which amounted to nearly $11.6 billion in 2000. All measures taken together add to a $13.5 billion impact generated by community colleges.

Return on investment
The study found that both students and communities benefit economically from community colleges. TACC found that for every dollar a student spends toward community college education, the student receives $9.05 in return in higher future earnings over the next 30 years.

Even if a student does not complete a degree, the student will receive an economic benefit from attending college. For every credit completed, students earn, on average, $117 more per year, according to the study. For every full-time year of study they complete, students earn an average of $3,826 more per year.

The report estimates that a student will recover the costs of attending college, including both work force earnings the student gave up to attend college and money spent on tuition and related educational costs, in less than six years, and the average rate of return on the student's investment is 26.1 percent.

The news is good for taxpayers as well. The report says the state will have a significant return on the money invested in the schools and that taxpayers recover their investments in about eight years. The report also estimates that by educating more Texans at community colleges, the state saves more than $276 million per year in avoided costs associated with crime, health care, welfare and unemployment.

By definition
Considering only the increased tax revenue to the state from community college students' higher incomes and the avoided taxpayer costs shows state and local governments will receive a $3 return for every dollar spent on community colleges over the next 30 years.

Measuring return more broadly, also considering the wages--not just the additional tax revenue--of all previous students now in the work force, researchers estimate that state and local governments get a return of $18 for every dollar spent.

Researchers also analyzed the return on investment if the social benefits related to health, welfare and other factors were excluded. With this analysis, the narrow perspective includes only the increased tax revenue from the higher salaries of educated students. The narrow perspective yields a return of more than $2 for every dollar spent. The broad perspective, including the increased tax revenue and the wages of former students, yields a return of more than $15 for every dollar spent.

Reporting value
Garcia says the commission also conducted 50 individual studies for each community college in the state so that each college can report its value to constituents. Dovalina lauds the thoroughness of the report and hopes the Legislature will consider the report when considering the state's upcoming budget.

"It supports what we're doing," he says. "We've always known that we make a tremendous impact on the community. The study demonstrates that community colleges are working for Texas. They're generating and producing skilled workers and university students that serve as an engine for the state economy."

Suzanne Staton