Thursday, July 19, 2007

Flawed Research Department-Higher ED Funding = Lower Economic Growth

Imagine basing a study on ideology instead of fact.

Review concludes that study is poorly grounded and findings are grossly overstated

EAST LANSING, Mich. – A recently released report published by the Mackinac Center for Public Policy claims that state funding to support colleges and universities actually results in lower statewide economic growth. A review of this report finds that the report’s analysis and data are weak and misleading and that the report relies on ideology rather than evidence to make its case.

The report, Michigan Higher Education: Facts and Fiction, was authored by Richard Vedder and Matthew Denhart. It was reviewed for the Think Twice think tank review project by Professor Jose Luis Santos of UCLA.

The report’s authors argue that Michigan’s colleges and universities did fine financially during the period from 2000 to 2004, even though the state sharply cut back on higher education appropriations during that time. Moreover, they analyze a national set of data and find that states with greater appropriations for higher education are more likely to have lower economic growth.

At a time when public higher education institutions have been required to increase tuition and fees while many state governments are reducing their appropriations, the Mackinac report offers conclusions that are potentially very important. In tough financial times, one wouldn’t want to waste state resources on something that would lower state economic growth. Santos’ review, however, shows how the report’s counter-intuitive findings are easily explained once the reader understands how the report is misleading.

The report’s authors mislead the reader by narrowly focusing on benefits from higher education that accrue to individual students despite considerable empirical research from scholars showing societal benefits. Santos offers the example of high-tech companies choosing to locate near research universities, thus bringing jobs and tax revenues to a region. He also mentions that residents with greater education tend to pay more taxes and are less likely to become burdens on the state. He notes that while it is hard to attach specific dollar figures to these benefits, there is no doubt that they exist. Yet the report’s authors refuse to include them in the calculations they present.

Another misleading element of the report is the numbers used to support the finding that colleges and universities have done fine financially despite sharp state cutbacks. The report discusses and draws conclusions about state allocations, but the numbers used for these calculations include (in addition to those allocations) all revenues, including fees, tuition, and private fundraising. In Santos’ words, the authors use “data about pears to draw lessons about mangos.”

The report’s authors also make much of the fact that the University of Michigan-Ann Arbor was able to raise fees and tuition and to find other sources of revenue, even while state appropriations were trimmed. But Professor Santos’ review points out that this flagship university was well-positioned to behave “more and more like a private university.” By contrast, he states, “less sought-after colleges and universities will not be in the same position to demand higher tuition and fees, and smaller universities are usually not able to raise the amount of dollars that can be raised at larger ones.”

In short, the authors grossly overstate their findings and policy-makers should view with great caution the conclusions drawn and the policy recommendation proffered to reduce state funding for public universities.

Find the complete review by Jose Luis Santos as well as a link to the Mackinac Center for Public Policy’s report at:

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