Thursday, October 24, 2013

New Tool to Assess the Fiscal Effects of Increasing Graduation Rates

Earlier this summer, I posted on a law enforcement analysis of why we should put more money into pre-k education as well a report by the Alliance for Education on the broader fiscal impacts of graduation rates.  The Alliance has now turned its report into an interactive tool that allows viewers to parse out the effects based on local tax revenues, federal tax revenues, lost income, gross domestic product, home sales, jobs etc.  The national effect of increasing our graduation rate to 90% would be to generate an additional $1.3 billion in federal tax revenues and $661 million in state an local taxes off of an additional $8.1 million in additional earnings by the graduates.  I would assume, however, that those numbers would compound over time as the previous year's graduates stay in the market and are followed by new cohorts each year.  It is not clear whether that effect is already cooked into the Alliance's data.  If not, it needs to be.  Regardless, the harder question is how much it would cost to increase our graduation rates to 90%.  Right now, the federal government spends about $15 billion on primary and secondary schools (excluding the one time Race to the Top grants).  Thus, the assumed additional tax gains would cover only about a 10% increase in federal education spending, although based on law enforcement's report, we might be able to double federal spending on education if we accounted for the savings we would generate from lowered crime and incarceration rates.  But again, is that enough?  Based on my rough sense of costing out studies performed in various states, that would probably get us close.  A national costing-out study performed by DOE would certainly help close that knowledge gap.

The value/fun of this new tool, however, may be its local uses at the state and city level.  I found that South Carolina is missing out on $18 million in taxes and the city of Columbia $3.5 million (based on $194 million and $37 million in additional incomes, respectively).  Those sound like big numbers at the local level, although South Carolina's are proportionally bigger than many other states given how low our current graduation rates are.

http://lawprofessors.typepad.com/education_law/2013/10/new-tool-to-assess-the-fiscal-effects-of-increasing-graduation-rates.html

Federal policy, School Funding, Studies and Reports | Permalink

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