The Benefits to Taxpayers from Increases in Students - RAND ...

Chapter Six
The Costs of Providing Additional Education
In previous chapters, we have described some of the financial benefits that taxpayers
will realize if students attain higher levels of education. Presumably, however, those
additional years of schooling will also cost money. In this chapter, we identify what the
costs of providing additional schooling would be. As noted in Chapter One, we do not
address the question of what could be done to induce students to continue their education
to a higher level or what such efforts would cost. Rather, we focus on the benefits
taxpayers would realize if students increased their education net of the costs of providing
the increases in education.
The relevant cost concept is that of “marginal” cost: the cost of providing education
to one additional student. Marginal cost will typically be lower than average cost
because several expense items (such as a principal’s salary) are fixed regardless of the
number of students enrolled. However, data on the marginal costs of education are
generally not available. Accordingly, we estimated the costs of raising a person’s education
level based on what the average costs are per student at each level of education.
Because average costs are typically larger than are marginal costs, our estimates overestimate
the costs of providing education to an additional student and, consequently,
underestimate the net benefits to taxpayers of increased education.
The costs of education vary from state to state and within states, by type of institution,
and by level of education. We used national average operating cost estimates
for U.S. public high schools and colleges to estimate the costs of providing increased
education and, consequently, taxpayers’ net benefits from increased educational attainment.
For the public secondary education system, per-pupil spending figures are based
on average daily attendance (ADA), the average number of students who attended
school on each day of the school year. At the postsecondary level, because college students
can enroll for a full course load or for individual classes, per-pupil spending figures
are based on full-time equivalent (FTE) students: the total number of enrollments
in all courses divided by the number of courses taken by a full-time student.
We used SIPP data collected in 2002 to estimate the benefits that taxpayers
would realize from increases in education. The closest corresponding school year is
the 2001–2002 school year. In that school year, the national average expenditure per
ADA in public K–12 education was $7,727 (U.S. Department of Education, National
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