University System's Economic Impact Claims Are A Crock

Every two years, right before the state’s legislative system, the North Dakota University System releases an economic impact study which claims billions of dollars worth of “impact” on the state’s economy. The idea is that the report will head off any crazy ideas lawmakers might get about cutting back on appropriations for, say, private drivers for the university presidents.

I mean, why forgo the economic impact of paying someone $80,000 per year to drive around some pampered bureaucrat?

The problem is that this report is a load of manure, as all such analysis are.

“The economic impact of the North Dakota University System and its students on the state is on the rise,” claims the NDUS press release accompanying this year’s iteration (read the full report here). “It now stands at an estimated $4.8 billion for Fiscal Year (FY) 2013, compared to $4.4 billion in FY 2011, according to the most recent NDUS Economic Impact report.”

That’s just over a 9 percent increase in economic impact. Given that general fund appropriations to the universities grew more than 37 percent this biennium, that’s not a very impressive number even if we stipulate to its veracity.

Which we shouldn’t. For one thing, they use “multipliers” to guess at secondary impacts of higher education spending which amount to a sort of self-serving, mathematical voodoo.

Also because the premise these numbers are based on is a crock.

The problem with these economic impact statements is that they’re presented to us as if though there would have been no economic impact had these dollars bent spent elsewhere. We’re supposed to believe that the only way to get a $4.8 billion economic impact is to dump money into the universities.

Which isn’t to say that there aren’t benefits to public spending on higher education. They are. But this isn’t the right way to measure them, because it can’t be contrasted against the unknowable which is how those dollars would have been spent had they not been spent on higher education.

Or, perhaps, spent a different way on higher education.

Consider this: North Dakota graduates roughly 7,000 high school seniors a year according to the Department of Public Instruction. In the current biennium, legislators appropriated about $902.6 million for the university system, or about $451 million per year, according to the most recent budget and finance numbers from Legislative Council.

What if we took that $450 million per year and divided up among North Dakota’s high school graduates? It would work out to more than $64,000 per student, or about $16,000 for every year of a four-year degree program. And the state could undoubtedly do even more, if we wanted to, given that not all high school graduates go on to college.

The university system wants us to buy into the idea that all the spending we do on higher ed – all the six-figure salaries for administrators and perks, all the new campus buildings, etc. – has this tremendous economic impact.

But what would the impact be if we stopped funding bureaucrats and institutions, and started funding students?