The Economic Value of WTAMU Main Report

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After adjusting for attrition and alternative education opportunities, we calculate the present value of the future added income that occurs in the state, equal to $2.3 billion. Recall from the discussion of the student and taxpayer return on investment that the present value represents the sum of the future benefits that accrue each year over the course of the time horizon, discounted to current year dollars to account for the time value of money. As stated in the taxpayer perspective, given that the stakeholder in this case is the public sector, we use the discount rate of 1.0%. Social savings Similar to the government savings discussed above, society as a whole sees savings due to external or incidental benefits of education. These represent the avoided costs that otherwise would have been drawn from private and public resources absent the education provided by WTAMU. Social benefits appear in Table 3.5 and break down into three main categories: 1) health savings, 2) crime savings, and 3) income assistance savings. These are similar to the categories from the taxpayer perspective above, although health savings now also include lost productivity and other effects associated with smoking, alcohol dependence, obesity, depression, and drug abuse. In addition to avoided costs to the justice system, crime savings also consist of avoided victim costs and benefits stemming from the added productivity of individuals who otherwise would have been incarcerated. Income assistance savings are comprised of the avoided government costs due to the reduced number of welfare and unemployment insurance claims. Table 3.5 displays the results of the analysis. The first row shows the increased economic base in the state, equal to $2.3 billion, from students’ higher earnings and their multiplier effects, increases in non-labor income, and spending impacts. Social savings appear next, beginning with a breakdown of savings related to health. These include savings due to a reduced demand for medical treatment and social services, improved worker productivity and reduced absenteeism, and a reduced number of vehicle crashes and fires induced by alcohol or smoking-related incidents. Although the prevalence of these health conditions generally declines as individuals attain higher levels of education, prevalence rates are sometimes higher for individuals with certain levels of education. For example, adults with college degrees may be more likely to spend more on alcohol and become dependent on alcohol. Thus, in some cases the social savings associated with a health factor can be negative. Nevertheless, the overall health savings for society are positive, amounting to $98.5 million. Crime savings amount to $28.3 million, including savings associated with a reduced number of crime victims, added worker productivity, and reduced expenditures for police and law enforcement, courts and administration of justice, and corrective services. Finally, the present value of the savings related Beekeeper Analogy Beekeepers provide a classic example of positive externalities (sometimes called “neighborhood effects”). The beekeeper’s intention is to make money selling honey. Like any other business, receipts must at least cover operating costs. If they don’t, the business shuts down. But from society’s standpoint, there is more. Flowers provide the nectar that bees need for honey production, and smart beekeepers locate near flowering sources such as orchards. Nearby orchard owners, in turn, benefit as the bees spread the pollen necessary for orchard growth and fruit production. This is an uncompensated external benefit of beekeeping, and economists have long recognized that society might actually do well to subsidize activities that produce positive externalities, such as beekeeping. Educational institutions are like beekeepers. While their principal aim is to provide education and raise people’s earnings, in the process they create an array of external benefits. Students’ health and lifestyles are improved, and society indirectly benefits just as orchard owners indirectly benefit from beekeepers. Aiming at a more complete accounting of the benefits generated by education, the model tracks and accounts for many of these external social benefits. Chapter 3: Investment Analysis 60
to income assistance amount to $1.5 million, stemming from a reduced number of persons in need of welfare or unemployment benefits. All told, social savings amounted to $128.3 million in benefits to communities and citizens in Texas. TABLE 3.5: PRESENT VALUE OF THE FUTURE INCREASED ECONOMIC BASE AND SOCIAL SAVINGS IN THE STATE (THOUSANDS) Increased economic base $2,250,062 Social savings Health Smoking $24,761 Alcohol dependence -$1,373 Obesity $37,260 Depression $31,841 Drug abuse $5,980 Total health savings* $98,470 FIGURE 3.3: PRESENT VALUE OF BENEFITS TO SOCIETY 5+95+R Added income $2.3 billion Source: Emsi impact model. Social savings $128.3 million $2.4 billion Total benefits to society Crime Criminal justice system savings $22,317 Crime victim savings $859 Added productivity $5,157 Total crime savings $28,333 Income assistance Welfare savings $616 Unemployment savings $917 Total income assistance savings $1,533 Total social savings $128,336 Total, increased economic base + social savings $2,378,399 * In some cases, health savings may be negative. This is due to increased prevalence rates at certain education levels. Source: Emsi impact model. The sum of the social savings and the increased state economic base is $2.4 billion, as shown in the bottom row of Table 3.5 and in Figure 3.3. These savings accrue in the future as long as the FY 2017-18 student population of WTAMU remains in the workforce. Return on investment to society Table 3.6 presents the stream of benefits accruing to the Texas society and the total social costs of generating those benefits. Comparing the present value of the benefits and the social costs, we have a benefit-cost ratio of 8.0. This means that for every dollar invested in an education from WTAMU, whether it is the Chapter 3: Investment Analysis 61
Page 1 and 2:
AUGUST 2019 The Economic Value of W
Page 3 and 4:
Executive Summary This report asses
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created by WTAMU is equal to approx
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Investment Analysis Investment anal
Page 9 and 10: Introduction West Texas A&M Univers
Page 11 and 12: CHAPTER 1: Profile of West Texas A&
Page 13 and 14: WTAMU employee and finance data TAB
Page 15 and 16: When using the Alumni Outcomes data
Page 17 and 18: The Texas Panhandle economy WTAMU s
Page 19 and 20: Table 1.4 and Figure 1.5 present th
Page 21 and 22: IN this chapter, we estimate the fo
Page 23 and 24: Operations spending impact Faculty
Page 25 and 26: the next four rows under the sectio
Page 27 and 28: non-labor income. This sums togethe
Page 29 and 30: ing impacts. Again, since construct
Page 31 and 32: of employees reported for each comp
Page 33 and 34: Calculating the increase in income
Page 35 and 36: the retained students, we estimate
Page 37 and 38: Alumni impact In this section, we e
Page 39 and 40: income is the difference between th
Page 41 and 42: Once these allocations are complete
Page 43 and 44: These impacts, stemming from spendi
Page 45 and 46: Student perspective To enroll in po
Page 47 and 48: their full earning potential that t
Page 49 and 50: Linking education to earnings Havin
Page 51 and 52: As shown in Table 3.2, the $44.6 mi
Page 53 and 54: Price Index), the corresponding nom
Page 55 and 56: We apply another reduction factor t
Page 57 and 58: TABLE 3.3: PRESENT VALUE OF ADDED T
Page 59: Social perspective Texas benefits f
Page 63 and 64: money spent on operations of the un
Page 65 and 66: WHILE WTAMU’s value to the Texas
Page 67 and 68: Buss, Christian, Jeffrey Parker, an
Page 69 and 70: Jaeger, David A. and Marianne E. Pa
Page 71 and 72: Ogden, Cynthia L., Molly M. Lamb, M
Page 73 and 74: U.S. Department of Health and Human
Page 75 and 76: Based on this sensitivity analysis,
Page 77 and 78: • Scenario 1: Increasing the perc
Page 79 and 80: Retained student variable The retai
Page 81 and 82: Economics Study of the allocation o
Page 83 and 84: Appendix 3: Frequently Asked Questi
Page 85 and 86: money” is called discounting and
Page 87 and 88: Appendix 5: Emsi MR-SAM Emsi’s MR
Page 89 and 90: Census’ Current Population Survey
Page 91 and 92: The matrices are built utilizing Em
Page 93 and 94: Appendix 6: Value per Credit Hour E
Page 95 and 96: economics. Those critical of the Mi
Page 97 and 98: Appendix 8: Overview of Investment
Page 99 and 100: 10 years from today given the going
Page 101 and 102: Appendix 9: Shutdown Point The inve
Page 103 and 104: Consider benefits now with referenc
Page 105 and 106: Appendix 10: Social Externalities E
Page 107 and 108: y education, gender, and ethnicity.
Page 109: weighted heavily towards the less t
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