Increased state appropriations for universities do not produce economic growth, authors find
Wednesday, June 20, 2007
Contact: Michael D. Jahr, Director of Communications
Bryan O'Keefe, Associate Director
Center for College Affordability & Productivity
MIDLAND — Michigan universities remain well-funded despite state appropriation cutbacks, according to a joint policy brief released today by the Mackinac Center for Public Policy and the Center for College Affordability & Productivity. Coauthored by Mackinac Center Adjunct Scholar Dr. Richard K. Vedder, director of CCAP, and CCAP research assistant Matt Denhart, the study also refuted the popular notion that spending more state resources on higher education will facilitate economic growth.
"It is clear from data recorded by universities themselves that revenues per full-time equivalent student were higher in 2004 than in 2000 for every university in Michigan save Ferris State," Vedder said. In the brief, titled "Michigan Higher Education: Facts and Fiction," Vedder and Denhart point out that it is important to examine revenues because, despite recent state appropriation reductions, universities are still well-funded. For example, the University of Michigan-Ann Arbor experienced a nearly 20 percent increase in inflation-adjusted revenues from 2000 to 2004.
The study also detailed "strong econometric evidence nationally" that state-level appropriations to higher education do not positively impact economic growth in the state. "Indeed," said Vedder, "greater appropriations for universities are associated with lower state economic growth." In addition to the empirical evidence, the authors cite case studies involving state government spending on universities and growth patterns in Michigan, Ohio and Illinois.
According to Vedder and Denhart’s analysis, "The statistical correlation between state and local governmental expenditures on higher education and the rate of economic growth (growth in real income per capita) is typically negative — higher spending for universities is associated with lower growth in a state, other things being equal."
Michael D. LaFaive, director of fiscal policy for the Mackinac Center, noted that the brief is extremely timely and should be useful to legislators.
"Too many Lansing politicians are currently agitating for a large tax hike to keep state spending high," said LaFaive. "Not only is this bad policy in a broad economic sense, but in terms of higher education it is difficult to argue that state universities are starved for revenue or that additional funding would correlate to improved economic development."
The brief is available at www.mackinac.org/8647.