Monday, November 09, 2009
Standard Article by Dr. Richard Vedder
Issue: Education
Governor John Hoeven and other state leaders have presided over a huge increase in higher education spending in North Dakota, arguing that universities are engines for economic growth and prosperity. By any measure, North Dakota spends far more on its universities than the typical state –state appropriations per capita in 2008 were 57 percent above the national average and well above those in any bordering state. North Dakota leads the nation in the population-adjusted number of four year state universities.
Has or will the Hoeven strategy work? A new study the Center for College Affordability and Productivity has done for the North Dakota Policy Council suggests the answer is “no.” Despite a strong historic state financial commitment to higher education, North Dakota has not been viewed as a particularly attractive play to live and work by many, having a high out-migration rate (even relative to neighbors like South Dakota). North Dakota has the dubious claim of being America’s only state with a lower population today than in 1920 (the typical state has tripled in population).
National evidence shows that the positive relationship between spending on state universities and economic growth that Governor Hoeven hypothesizes simply does not exist. The top ten states in terms of economic growth from 1990 to 2008 had state higher education appropriations nearly 20 percent lower per capita than in the 10 lowest growth states.
More sophisticated statistical analysis reaches similar conclusions –more higher education spending has no positive impact on average incomes, and quite likely a negative one. Subsidizing universities means taking money from high productive citizens in the private market economy and giving it to a sector that some evidence shows has had no productivity growth for the last four decades (maybe 2,000 years: teaching technology today is not much different than it was in the time of Socrates). Moreover, there is no solid evidence that higher university research spending has any positive growth effect.
By some measures North Dakota seems to get less “bang for the higher education buck” than most states. While the state is well above national averages in public spending on higher education, it is below that average in terms of the percentage of the adult population with college degrees. While a modestly larger proportion of 18 to 24 year old North Dakotans are in college than the national average, that does not translate into more adult college graduates.
For the North Dakota Policy Council study, we developed something called the “appropriations effectiveness ratio” which has an average of 100 for the nation as a whole and, coincidentally, also for South Dakota, but a value of 67 for North Dakota (Minnesota was 101, Montana 134). That ratio divides the number of adults with college degrees by the amount of state higher education appropriations. It is true one reason for North Dakota’s low score is out-migration of college educated persons. But that raises the question: why should North Dakota taxpayers burden themselves to increase the human capital of other states? Census Bureau data reveal that from 1995 to 2000, North Dakota led the nation in the out migration rate of young college educated citizens. I doubt that migration patterns have altered dramatically since.
Increased spending on higher education does not have a positive economic payoff, but the taxes used to finance such spending have clear negative consequences on economic growth. North Dakota would be better off sharply reducing the higher education spending binge, and devoting the savings to reducing the state’s tax burden.
Read the study by clicking HERE.
Richard Vedder is an NDPC Economic Development and Higher Education Policy Fellow and director of the Center for College Affordability and Productivity.
