Study sees universities as investment

May 19, 1994|By John E. Woodruff | John E. Woodruff,Sun Staff Writer

Maryland's public university system has spent $25,000 this academic year to examine its own role in the economy -- and has declared that it is giving the state more than its money's worth.

Taking fiscal 1992 as an example, the study found that the University of Maryland System's 11 degree-granting campuses and two research institutions generated $671 million in tax revenues while receiving $522 million in state support.

In an average year, the university system returns about 28 percent more in state revenues than it absorbs, the study concluded.

"This is not your traditional application of economic multiplier effects but the first attempt Maryland has made to look at how the universities pay back the investment by building up the state's human capital, by improving the productivity and earning power of the work force," said David Stevens, the University of Baltimore economist who conducted the study.

Only one other study, in Massachusetts, has taken a similar approach, he said.

Legislators and senior state officials, who control a big share of the universities' financial base, "have known the value in terms of sports teams and arts and cultural facilities, but as a labor economist, I was startled to learn that there had never been an attempt to look at public higher education as an investment with a tangible payback," Mr. Stevens said.

The state's annual funding from taxes covers about one-third of the universities' $1.6 billion budget. The rest comes mainly from federal grants and contracts, and from tuition and fees.

To reach the $671 million figure, the study first estimated how much more University System graduates who stayed in Maryland to work earned, compared with Marylanders with no degrees, and then calculated how much tax revenue would have been generated by those earnings and by "enhanced economic activity attributable to those earnings." That calculation yielded $486 million.

The study then added "out-of-state revenues," mainly out-of-state tuition and federal grants and contracts, and got a total of $185 million.

The two figures together account for the claim to have "generated $671 million in tax revenues" in 1992.

The study, made public yesterday, was conducted by the University of Baltimore's Jacob France Center. It is the second study in three years designed to demonstrate that the system is worth more than the half-billion dollars a year the state spends on it.

The other study, conducted in 1991 by John Dorsey, an economics professor at the University of Maryland College Park, used standard economic-development "multipliers" to estimate economic activity that grows out of University System spending.

The Dorsey study estimated that every dollar spent on the University System touches off $5.60 in economic activity.

In a press release yesterday, University System officials lumped that estimate from the 1991 study together with the new study's estimate that higher earnings of graduates touch off $2.10 in economic activity for every $1 spent on the system, for a total claim that the state gets $7.71 in business benefits from every $1 it spends on its main universities.

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