Higher Education “Underinvestment” Provides a Return

It's often repeated in the halls of government and the state-focused media that Michigan "underinvests" in higher education. The facts suggest otherwise.

In 2003, Michigan had the seventh highest spending among the states on public universities. Appropriations here have been fairly level since then, but we were still the 10th-biggest higher ed spender in 2008. Even with sideways revenues for half the decade, Michigan has been surpassed only by Ohio, Pennsylvania and Georgia in total dollars devoted to higher education.

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A much more important question is what the state expects in return for the $1.5 billion of tax money it will give to state universities this year. Citizens here are concerned about jobs and the economy, so will this spending generate growth?

Probably not. According to the results of a 2007 study from Matthew Denhart and Richard Vedder, higher levels of state university appropriations are associated with lower economic growth. Apparently, letting families and businesses keep more of their money rather than redistributing it to universities generates better economic performance.

Actually, the very concept of governments "investing" in higher education is problematic on its face. The value of an investment is the amount someone else will pay for it. Handing more tax dollars to universities is just another form of government spending, and such spending is associated with fewer jobs and slower growth.