Economic Impact Study



Economic Impact Study Executive Summary Introduction How do the economies of Sweetwater County and the State of Wyoming benefit from the presence of Western Wyoming Community College (WWCC)? An obvious question often asked, but rarely answered with more than anecdotes. Recently WWCC hired CC Benefits, Inc. to answer this question using a comprehensive economic model they developed with funding from the Association for Community College Trustees (ACCT). The model, which took over a year to develop, was designed to capture and quantify the economic and social benefits of community colleges (CCs). It relies on data collected from individual CCs, and translates these into common sense benefit/cost and investment terms. The model has been subjected to peer review and field-tested at more than 220 different CCs throughout the nation. Model results are based on solid economic theory, carefully drawn functional relationships, and a wealth of national and local education-related data. The model provides an analytical alternative from the all-too-common “advocacy analyses” that inflate benefits, understate costs, and thus discredit the process of higher education impact assessment. Taxpayer Perspectives State and local government spent $13.8 million in support of WWCC during the analysis year. Is this a good use of taxpayer money? The CC Benefits, Inc. study indicates that the answer is a resounding yes: returns far outweigh the costs, particularly when a collection of social savings is included in the assessment. Taxpayer Return on Investment The return on a year’s worth of state and local government investment in WWCC is obtained by projecting the associated educational benefits into the future, discounting them back to the present, and weighing these against the $13.8 million state and local taxpayers spent during the analysis year to support the College. The analysis is based on the portion of WWCC operations that is wholly dependent on state and local government support. Two investment perspectives are possible when considering return on investment, one broad and one narrow. The broad perspective counts all benefits regardless of recipient. WWCC chose to report its economic impact on Sweetwater County and the State of Wyoming using the narrow perspective. Note that the narrow perspective is the accounting stance of the private sector: revenues on one side of the books, costs on the other, and profits equaling the difference. The narrow perspective limits the benefit stream to state and local government budgets, namely increased tax collections and expenditure savings. For example, in place of total increased student earnings, the narrow perspective includes only the increased state and local tax receipts from those higher earnings. Similarly, in place of overall crime, welfare, unemployment and health savings, the narrow perspective includes only those portions that translate to actual reductions in state and local government expenditures. It is often the case that state government will undertake activities wanted by the public, which are unprofitable in the marketplace. This means that positive economic returns are generally not expected from government investments. From the narrow taxpayer perspective, therefore, even a small positive return (a benefit/cost ratio equal to just greater than 1, and/or a rate of return equal to or just greater than the 4.0% discount rate used in this analysis) would be a most favorable outcome, certainly one that justifies continued taxpayer support of the College. For WWCC, the narrow perspective results greatly exceed the minimum expectations. The results indicate strong and positive returns: a rate of return of 10.3%, a benefit/cost ratio of 2.1 (every dollar of state or local tax money invested in WWCC today returns $2.08), and a short payback period of only 12.4 years. The bottom line: when state and local governments spend money in support of Western Wyoming Community College, they receive benefits in the form of increased tax receipts and an assortment of reduced expenditures or avoided social costs. The narrow investment perspective counts only benefits that could be entered into the books of state and local governments. WWCC Stimulates the Local Economy WWCC had operating expenses of $18 million in fiscal 2003, and spent $13.8 million (77%) of this in Sweetwater County to purchase supplies and pay salaries, wages, and benefits. WWCC employs 176 full-time and 333 (total number teaching in any given year varies) part-time faculty and staff. WWCC paid faculty and staff wages, salaries, and benefits of $11 million in fiscal year 2003. For every $1 WWCC pays in earnings, there is an additional $0.22 in earnings generated off-campus in the Western Wyoming Community College District economy - this is the commonly known multiplier effect. WWCC activities encourage new business, assist existing business, and create long-term economic growth. The College enhances worker skills and provides customized training to local business and industry. It is estimated that the present-day Sweetwater County workforce embodies over 1.6 million credit and non-credit hours of past and present WWCC training. Student Perspective The student’s perspective on the benefits of higher education is the most obvious: he or she sacrifices tuition and current earnings for a lifetime of higher earnings. For every credit completed, WWCC students will, on average, earn $129 more per year each year they are in the workforce, i.e., for every full-time year students attend WWCC they will earn, on average, an additional $3,764 per year. WWCC Increases Individuals’ Earning Potential 7,136 credit and non-credit students attended the College in fiscal year 2003, 74% of whom were employed full- or part-time while attending. As many as 75% of the students stay in the region initially after they leave the College and contribute to the local economy. Their continued contribution is measured after accounting for out-migration, retirement, and death. Studies demonstrate that education increases lifetime earnings. The average annual earnings of a student with a one-year certificate are $28,365, or 81.2% more than someone without a high school diploma or GED, and 16.1% more than a student with a high school diploma. The average earnings of someone with an Associate Degree are $33,369, or 113.2% more than someone without a high school diploma or GED, and 36.5% more than a student with a high school diploma or GED. After leaving the College, the average WWCC student will spend 39 years in the workforce. The student who leaves with a two-year college degree will earn $352,514 more than someone with a high school diploma or GED. Over their next 39 years in the workforce, the average WWCC student’s discounted lifetime earnings (i.e., future values expressed in present value terms) will increase $7.79 for every education dollar invested (in the form of tuition, fees, books, and foregone earnings from employment). Students enjoy an attractive 20.9% rate of return on their WWCC educational investment, and recover all costs (including wages foregone while attending WWCC) in 7.2 years. Conclusion The results of this study demonstrate that WWCC is a sound investment from multiple perspectives. The College enriches the lives of students and increases their lifetime incomes. It benefits taxpayers by generating increased tax revenues from an enlarged economy and reducing the demand for taxpayer-supported social services. Finally, it contributes to the vitality of both the local and state economies. For more information on these results or to read the report in its entirety, contact WWCC at 307-382-1639. Western Wyoming Community College 2500 College Dr. P. O. Box 428 Rock Springs, WY 82901 307-382-1600 www.wwcc.wy.edu WWCC Home