Are Community Colleges Giving Taxpayers a Bang for Their Buck?

May 22, 2012 by Mary Fulton

Guest blogger Clive Belfield with the Community College Research Center examines the efficiency and return on investment of community colleges.

Community colleges are under pressure — critics cite low graduation rates as the ultimate evidence that these colleges are failing our students and bilking taxpayers.

But this is wrong.

Community colleges are efficient in the most important economic sense of the word: they take in inputs (students) and produce an output (educated persons) that is worth more than they spend.

In a recent working paper I wrote for the Community College Research Center, I looked in detail at what colleges spend and related this to what they produce.  The bottom line is that taxpayers get a really good deal.

Let’s assume that all taxpayers care about are the graduates from community college — the certificates and associate degrees.  So we add all these up. This is unfair to the colleges, of course — at least 20% of students transfer to four-year institutions without a degree.  But let’s just work with this low-ball measure of output.

Next I count up what each taxpayer invests in education, excluding all the unrelated spending and the fees students pay.

In 2008, across almost 900 comprehensive community colleges, the average cost per associate degree was $52,900; across the almost 200 vocational colleges, the average cost was $42,700.  These figures might seem like a lot of money to produce an associate degree — but what are the benefits?  In one detailed study,** all the benefits to taxpayers of an associate degree over a lifetime were added up.  These amounted to $127,200.

In the economic sense of producing something of value therefore, community colleges are efficient — for every dollar the taxpayer invests into the community college system, it gets back $2.50.

But the picture is even rosier than this.  Community colleges actually have been getting more efficient over time.  Since 2000, the cost to produce each associate degree in real dollars has fallen by at least $10,000.

However, there is another meaning of efficiency — that colleges should spend the least amount of money to produce each graduate.  Using this definition, we see two related puzzles.

First, colleges vary dramatically in how much it costs them to produce each associate degree.  There are quite a few colleges where the cost is over $100,000; but there are also quite a few where the cost is less than $40,000.  What drives these differences, we don’t know.  It can’t be fully explained away by variation in student ability or poverty levels.

Second, more efficient colleges — those producing degrees for $40,000 — don’t appear to be able to sustain their advantage.  The colleges that are more efficient in one time period are not necessarily more efficient in the next.  For instance, between 1993 and 1996, one-quarter of colleges achieved efficiency gains of over 10%, i.e. they produced degrees for 10% less than they had at the start of the period.  But these gains were not sustained.  In the next four-year period, these colleges reverted back to the average efficiency levels.

Colleges don’t look like businesses, where a market leader might grow progressively more efficient because it has a clear technological advantage. They seem more like tortoises and hares, where each college takes a turn at playing each role.

If we want community colleges to become increasingly and consistently efficient, more work is needed to find the answers to these confounding puzzles.

 

**Trostel, P. 2010. The fiscal impacts of college attainment. Research in Higher Education, 51, 220-247.

 Clive Belfield is a Research Affiliate at the Community College Research Center and an Associate Professor in the Department of Economics, Queens College, City University of New York.  Dr. Belfield’s most recent book is The Price We Pay: The Economic and Social Costs of Inadequate Education. He has authored numerous articles on the economics of education and has served as a consultant to the World Bank, the U.S. Department of Education, and the British Government, as well as non-profit foundations and education think tanks.