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New Study on Higher Education Spending - Increased State Funding for Higher Education Does Not Positively Impact Economic Growth
By Richard Vedder and Matthew Denhart
CCAP/Mackinac Center Study
June 20, 2007
The Center for College Affordability and Productivity (CCAP) and Mackinac Center for Public Policy are jointly releasing a new study today on the relationship between increased state higher education appropriations and economic growth.
The study examines the state of Michigan and calls into question several popular notions about higher education spending. The authors - CCAP Director and Mackinac Center Adjunct Scholar Richard Vedder and CCAP Research Assistant Matthew Denhart - found that state-level appropriations to higher education do not positively impact economic growth in the state. The evidence compiled in the study even points to the opposite conclusion: higher state appropriations are associated with lower economic growth.
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."
Vedder and Denhart also found that most Michigan state universities are still well-funded, despite recent state appropriations reductions. "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. For example, The University of Michigan-Ann Arbor experienced a nearly 20 percent increase in inflation-adjusted revenues from 2000 to 2004.
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 state politicians in Michigan 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 http://www.mackinac.org/article.aspx?ID=8647
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