PHOENIX-In a study released today by the Goldwater Institute, John Locke Foundation higher education policy analyst Jon Sanders finds little evidence that government spending on higher education drives economic growth. "Given the claims of Arizona's higher-education spending advocates," Sanders says, "you would expect to see a robust correlation between increased state spending on higher education and economic growth. In fact, I found that there was no consistent, statistically significant correlation."
Using data from all 50 states spanning more than two decades, and incorporating lags up to five years, Sanders' regression analyses find weak and inconsistent correlations between state funding of higher education and economic growth. Comparing states' higher-education appropriations with gross state product reveals that two of the 10 fastest-growing states from 1981 to 2000, New York and Rhode Island, experienced a real decrease in per capita higher-education appropriations, while three of the 10 slowest-growing states, Mississippi, New Mexico, and North Dakota, were among the top 10 in growth of real higher-education appropriations. From 1991 to 2000, none of the top 10 states in greatest higher-education appropriations were among the top 10 in economic growth. In that same period, Arizona was 46th among the states in real higher-education appropriations per capita-actually appropriating less in 2000 than in 1991-yet it was the 16th fastest-growing state.
Sanders' study comes at a time when lawmakers are planning to borrow $400 million to build high-tech facilities at Arizona's universities. "But appropriation decisions should be based on fact, not fiction-no matter how noble the fiction," he says. Sanders concedes that there may be a connection between private higher-education spending, including tuition paid by students, and economic growth. "But that is not what university spending advocates are talking about," Sanders says. "They are talking about spending taxpayer money on university facilities." He argues that any investment that actually offers the kind of returns promised by spending advocates will have no shortage of willing private investors. "University spending advocates want us to bet the ranch on certain high-tech initiatives," Sanders argues, "but legislators would do better to focus on making Arizona's business climate attractive to all forms of economic enterprise."
The new study, "Does Spending on Higher Education Drive Economic Growth? 20 Years of Evidence Reviewed," is the first in a series examining the impact of higher-education spending and investment on Arizona's economy. It can be found online here.