Increased Higher Ed Funding Won’t Earn an “A” in Econ

(Patrick R. Gibbons/The Western Wrangler) – As the rest of the Nation recovers, Nevada’s economy seems to slide further and further into the abyss. Nevada has the nation’s highest unemployment rate (over 14%). We also face a significant budget shortfall. The general fund revenue for the state budget is projected to be $5.3 billion for the next biennium – current spending is $6.4 billion.

Governor Sandoval has proposed cutting the budget and implementing reforms – most notably for education. Higher education in particular is slated for a 7% cut in state appropriations (17.5% if you include the lost ARRA federal subsidy).

The relationship between higher education and positive economic growth is “indisputable,” claims the state’s higher education chancellor Dan Klaich. Meanwhile, the colleges and universities of Nevada have been rolling out a new PR campaign, arguing “invest more in us and we’ll help grow and diversify the economy.”

To discuss the magnitude of the cuts, the Board of Regents called a meeting on February 3, 2011. After three hours of testimony, the only solutions presented were 1) close class sections, 2) reduce enrollment, and 3) terminate faculty.

It’s not at all clear that higher education can help grow Nevada’s economy. Naturally, a more educated work force can be more productive and earn higher incomes. But that assumes we’re actually educating people in the first place. It also assumes that jobs are created just because of education quality rather than a host of other factors.

First of all, states with top-tier universities like California, New York, and Michigan are bleeding residents and jobs. Its not just these three, many other states with top universities are also struggling to create jobs and keep residents. Between 2000 and 2008, the combined net migration rate for states with an Ivy League school was -2.5 million persons. Nevada, with its 3^rd– and 4^th-tier universities, had a net migration rate that was higher than the combined rate of all 32 states with a top 100 university. In fact, having a Top 100 University as ranked by U.S. News and World Report means a state also averages a statistically higher unemployment rate (nearly 3 points higher than not having a top 100 university).

University officials in Nevada are making a very basic logical fallacy. They are seeing Nevada’s economic struggles (fact) and assuming that Nevada’s low percentage of college graduates (fact) must be a reason why the economy hasn’t diversified and recovered. This fallacy leaves them believing they’re the saviors of Nevada, thus, we can’t cut their budget.

Conveniently, they forget that before this economic crash, Nevada sustained high economic growth, population growth, high income-per capita, and below average poverty rates for DECADES, despite having a “poorly educated” populace.

It is especially unlikely that further investments in higher ed will boost Nevada’s economy when the Universities spend so much already and produce very little in return.

UNLV spends $19,000 per FTE (full-time equivalent) student and only graduates 48% of the full-time students within 8 years. Meanwhile, UNR spends over $34,000 per FTE student and graduates merely 54% after 8 years.

At the Regents meeting, I pointed out that UNLV and UNR spend more money per-pupil and employ more adults per-pupil to do the same job. According to Dr. Jay Greene’s report “Administrative Bloat at American Universities” both UNLV and UNR grew their employees faster than the student body between 1993 and 2007. UNLV saw inflation-adjusted spending per-pupil rise 59% while UNR saw spending rise 21%.

According to the U.S. Department of Education, UNLV’s inflation adjusted credit-hour costs have risen 90% while fees increased a whopping 771% over the last decade. At UNR the increase was 80% and 290% respectively.

How can anyone consider UNLV or UNR to be a wise investment? Spending more and more money to employ more adults to do the same shoddy job will not grow our states economy. At best it will do nothing at all. At worst, it may actually retard or reverse economic growth.

My two minutes of comment were up at that point, but the damning facts keep piling up. The Lied Institute at UNLV released a rather shoddy report calling for more “investment” in higher education, pointing to Arizona and Utah as states to emulate. I’ve blasted the report to pieces here and here.

Failing to conduct even the most basic literature review or even analysis on state spending, the Lied Institute researchers failed to notice that Nevada already spends more on education and research per-pupil than Utah and Arizona.

In particular the Lied Institute researchers and Brookings Institution Mountain West have called on lawmakers to emulate Arizona State and the University of Utah.

ASU spends $28,000 per-pupil on “Education and General Expenditures per FTE” according to the Education Trust. That is $6,000 less than UNR, Nevada’s flagship university. As much as Arizona State is made fun of for their low quality, they spend less and graduate more of their own students than UNR.

The University of Utah does in fact get the lion’s share of resources in Utah – spending over $50,000 per FTE. Embarrassingly, their 6-year graduation rate is 51%. They make Arizona State – a university lampooned by everyone including SNL and the Daily Show – look like Harvard AND a bargain.

Nevada needs to rethink the higher education paradigm because being bloated, wasteful, and ineffective is no way to grow an economy.

(Patrick R. Gibbons is an experienced researcher, analyst, and educator living in Las Vegs, Nevada.)