Show Me the Money! Why Higher Ed Should Help K-12 Do Economic Impact Studies


At no point in recent history has the need for educational institutions to justify their investment value been greater than today. Despite news of a “slow recovery,” budget cuts continue with drastic consequences for schools serving all levels of education. During these economically insecure times, when government-supported industries are competing for scarce public funds, evidence of education’s positive economic impact is more important than ever.

Organizations and industries in all sectors increasingly conduct economic impact studies to draw attention to the positive direct and spillover effects they have on employment creation, state revenue, the tax base, inter-industry business generation, consumer spending and so on. Impact assessments have become hugely popular marketing tools. Just Google “economic impact study” and you will get 9,820,000 hits in 0.48 seconds.

In education, economic impact studies have been largely the product of higher education institutions. Colleges and universities have recognized that they can cultivate public, political and financial support by effectively demonstrating their high return-on-investment value. For more than a decade, all types of higher education institutions (two-year, four-year, public, private, rural, urban, large, small) have been conducting these studies. Some of these studies are large-scale, incorporating sophisticated econometric modeling and the use of a multiplier to identify the full-scale impact of an institution(s) in a given city, metropolitan area or region. Others are less extensive, using straightforward indicators such as institutional spending, capital outlay and salaries and wages disbursed to demonstrate a direct economic impact.

Business and nonprofit leaders across a diverse array of industries, including higher education, understand that an economic impact statement serves as a valuable public relations and political tool. However, in education, the K-12 sector has yet to catch on to the trend. Given that the recession is wreaking havoc on elementary, middle and secondary school budgets, it would benefit K-12 schools to follow higher education’s example and draw greater public attention to their significant economic worth.

K-12 officials can benefit by engaging higher education leaders in discussions about how to administer economic impact studies. In fact, I would argue that it is in the interest of higher education to assist K-12 schools in carrying out economic impact assessments; after all, supporting earlier educational levels translates into a direct investment in tomorrow’s college students. In other words, the adequacy of educational services and inputs provided for present-day elementary, middle and secondary schools has a clear effect on the college readiness, 21st century skill set and subsequent workforce preparedness of students entering college in the years to come. Regional conferences, online forums and workshops are an excellent place to initiate conversations and hold forums that can lead to important collaborations between higher education and K-12 institutions.

Tough budget times

In New England, elementary, middle and secondary school districts are encountering budget shortfalls in the millions. Many New England school officials report that their district budgets have been reduced so drastically that they have no choice but to cut personnel and programs despite every effort to avoid doing so.

According to a study of the American Association of School Administrators (AASA), schools nationwide have been responding to cutbacks by decreasing educational programming, increasing class sizes, laying off employees, under-heating classrooms, shortening the school week, doing away with intervention programs, eliminating co-curricular programs and activities, charging rising user fees for after-school athletics and arts and freezing spending on technology and instructional materials. The AASA surveyed 836 school administrators and found that among schools in the survey:

  • 44% increased class sizes in 2009-10, up from 13% in 2008-09
  • 44% laid off personnel in 2009-10, up from 13% in 2008-09
  • 22% cut academic offerings in 2009-10, up from 7% in 2008-09
  • 27% stopped providing electives in 2009-10, up from 7% in 2008-09
  • 28% eliminated extra-curricular activities in 2009-10, up from 10% in 2008-09
  • 32% stopped technology purchases, up from 16% in 2008-09
  • 24% cut down on instructional materials in 2009-10, up from 19% in 2008-09.

The school budget crisis has worsened year after year since the recession began. Although stimulus funds provided through the ARRA have prevented more harmful cuts from occurring, they have not brought school funding to an adequate level. Many people believe this fiscal crisis is a passing phase, and normalcy will return when the “Great Recession” is over. However, the financial downturn is taking a human capital toll that compounds each day that kids are in school. The phenomenon of cuts is not limited to a few schools, but is widespread, and hurting the most vulnerable learners, many of whom are seeing targeted programs such as enrichment activities, after-school tutoring, technology support and remedial services obliterated completely.

NEASC’s exploration

As a research associate for the New England Association of Schools & Colleges (NEASC), I have worked on a New England-wide economic impact assessment of NEASC-accredited schools for the past six years. Through this time, I have learned a great deal about the political benefits of carrying out these studies and the demand for economic impact information both within and outside of the education sector. Certainly NEASC, one of six regional accrediting associations in the nation with a membership consisting of 2,000 schools and higher education institutions, has been uniquely positioned to assess the impact of the region’s schools given its access to member data and a dedicated research office, which serves as an informational clearinghouse to educators, elected leaders and the public.

NEASC conducted its first economic impact study in 2004 to illustrate that educational institutions are more than mere economic contributors—they are vital to New England’s economic development. To effectively convey this message to politicians, NEASC needed to deliver data in concise and crystal clear terms. A colleague once said to me that, as educators, we would benefit from gaining greater proficiency in “Washingtonian,” (i.e. politician-speak), a language that does not have nouns, adjectives or verbs but rather numbers, statistics and bullet points. So, in 2004, NEASC issued its first Economic Impact Report to showcase a crystal-clear figure of $78,862,645,323 representing the direct impact of accredited PK-16 schools in the New England region.[1]

Few people—educators, public officials, members of the business community—had any idea that education had such an enormous impact on the New England economy until NEASC shared its initial findings. Thereafter, we garnered considerable attention from regional and local officials who sought to share this information with constituents or present it at regional meetings, conferences or in speeches. Some organizations approached NEASC requesting town-level or other sub-regional data.

NEASC continues to publish an annual Economic Impact Report that is shared with educators as well as the New England Congressional delegation and their aides each year. Each subsequent study has shown an increased impact: $78 billion in FY03, $93 billion in FY04, $114 billion in FY06 and $135 billion in FY07. Through sharing this information, it is our intent to prompt a change in the discourse surrounding school finance so that regular citizens and elected leaders will view schools as more than a social good consuming public funds, but as a vital economic stimulus with huge investment gains for everyone.

The average citizen may find it surprising that officials do not already have access to or an understanding of economic impact figures for all publicly funded sectors. Often, people assume that some bureaucrat or Congressional aide is collecting this sort of information. In practice, politicians tend to rely on industry to gather this data and share findings with stakeholders. The burden of identifying the investment value of educational institutions—whether in a town, county, metro-area, state or region—is largely on the education sector itself.

While there are education and market research firms that conduct impact studies, so far only higher education institutions have seemed to contract these firms to do studies. For instance, Appleseed, a New York-based economic development, market and social research organization, has conducted dozens of impact studies for higher education institutions. In 2003, it published Engines of Economic Growth: The Economic Impact of Boston’s Eight Research Universities on the Metropolitan Boston Area, which today remains widely referenced for its valuable data on higher education’s financial impact in Boston.

Economic impact studies are not always large-scale and can, indeed, be undertaken by an individual K-12 school. Choate Rosemary Hall, an independent secondary school in Wallingford, Conn., has a link on its website with economic impact information. Highlighting its local impact, Choate states that it is the seventh largest employer in Wallingford and spends $16.8 million on faculty and staff salaries. School purchases total more than $28 million while tax and utility expenditures amount to over $1 million. Choate’s expenditures on capital projects have totaled $110 million from 1994-2008. The Choate study could easily be used as a model for other public and independent schools looking to share some uncomplicated economic impact data.

NEASC’s latest Economic Impact Report, issued in February of 2010, shows that NEASC member schools and higher education institutions in New England have a summative economic impact amounting to $135,209,540,664 as of FY07 (the latest year for which audited school financial data are available). Today, when NEASC informs public officials that the region’s schools and higher education institutions have an impact on the regional economy that exceeds most other industries, they are very attentive.

Job engines

Policymakers are especially interested in job-related impact data. While much of the industry’s impact is carried by higher education, the K-12 sector in New England still represents an impact of more than $17 billion. The estimated revenue base of NEASC-accredited K-12 public schools is $9.6 billion as of FY07, exceeding the same-year revenues of several top-grossing regionally based Fortune 500 companies, including BJs Wholesale Club, Praxair, Northeast Utilities, Pitney Bowes, Genzyme and United Natural Foods.

In addition, NEASC’s analysis of U.S. Census Bureau data finds that about 10% of the workforce in New England has a job connected with education. A leading employment sector in New England, education provides jobs to more than 490,000 people. Moreover, the number of New Englanders with a job in education[2] is greater than the number of people employed in healthcare occupations (411,250), computer and math sciences occupations (204,710) and business and financial services (334,720), according to U.S. Department of Labor data. Schools have an enormous impact on other industries in the region. Accredited public schools at the K-12 level alone spent more than $883 million on capital investments, $6 billion on instruction, over $389 million on student transportation and $252 million on food services in FY07.

At this point you may be wondering why, if NEASC already evaluates the economic impact of K-12 schools in New England, there is a need for more regional studies. As it turns out, our study is not without limitations. For one, NEASC’s study assesses only accredited school and higher education institutions. That means that while most public and private higher education institutions and secondary schools are incorporated in the study, the majority of public elementary and middle schools, which constitute a relatively new membership category at NEASC, are not. Thus, education’s impact in New England is higher than our estimate since our figure does not include all K-12 schools in the region. Additionally, the NEASC study uses New England as the primary geographic unit of analysis and then disaggregates data by state, so that the broad regional impacts are determined but the sub-regional and local impacts are not (a study of sub-regional impacts would require, in fact, an altogether different methodology).

Votes for school budget overrides across New England towns and heightened controversy over public education spending render a need for public schools to demonstrate to taxpayers the local economic impact of their school. NEASC does not have local-level impact information, which would necessitate the collection of many different data that only schools themselves can track.

The demand for local and sub-regional level economic impact information is increasing. In the past six months, NEASC has received more requests from regional development councils, college consortia, reporters and education committees requesting town or county data. While we are able to share New England, state and some sub-regional data, we do not have local economic impact information to meet the requests we receive. Despite the growing demand for economic impact data at the sub-regional level, there is currently an industry dearth of collected, organized and deliverable information.

One way to launch studies in the K-12 sector is to actively foster collaborations. An initial approach for K-12 officials would be to find higher education experts, perhaps at a college or university located in the same town or county. K-12 schools can benefit immensely from partnering with higher education institutions that can help them demystify the how-to’s of conducting an impact study.

This year, NEASC, will celebrate its 125th anniversary at its Annual Meeting and Conference at the Fairmont Copley Plaza Hotel in Boston from Dec. 1 to 3, 2010. We will present a session at that meeting titled “Education: New England’s Greatest Economic Asset” and we hope to engage K-12 and higher education leaders in a forum on this issue, in order to spearhead partnerships between K-12 schools and higher education institutions. We invite readers to attend. Registration details are available at the NEASC website: www.neasc.org.  [In addition, we will be reading your comments posted for this article and hope to spearhead some productive online discussion on this subject through NEJHE’s interactive website.

To view the accompanying tables and graphs for this article, see pdf.

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Nadia Alam is a research associate at the New England Association of Schools & Colleges .


Endnotes


[1] The NEASC study does not use a multiplier to capture residual economic impacts. NEASC aims to keep the findings straightforward, precise and avoids theoretical measures determined by a multiplier.  Multiplier effects represent economic impacts generated by indirect or offshoot spending. For instance, while an institution’s expenditure on personnel, salaries and wages and every day materials constitute a direct impact, the next-round spending of those salaries and wages by institutional personnel represent an offshoot (multiplier) impact.

[2] includes teachers, postsecondary professors, instructional coordinators, teacher assistants, administrators and other school staff

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