As states and localities are increasingly opening their doors to employment for people who haven’t gone on to higher education, it can sometimes be overlooked that college has its benefits for governments in a variety of other ways. 

But a new report by the Center for Business and Economic Research (CBER) at the University of Kentucky,  points to a significant fiscal return on investment for every dollar Kentucky invested in its institutions of higher learning.

In fact, as the report explains “Of the cohort of Kentucky students who graduated from high school in 2015 as our case study, we estimate the financial return from tax revenue to be around four-and-half times greater than the initial state investment and the local economic impact nearly seventeen times greater.” Those numbers are based on increased individual earnings, greater consumer spending and higher government tax revenue.

As one of the report’s authors, Michael Childress, a CBER research associate at  University of Kentucky was quoted on the state’s website,  “To put it simply, every dollar the Kentucky General Assembly spends on postsecondary education returns $4.50 to state and local governments through income, sales and property taxes. “That dollar also generates $17 for local businesses, which means more jobs and stronger local economies.”

Those are potent numbers to be sure, but the report indicates that in some ways they’re just the tip of the iceberg as they don’t include “the financial benefits of better health outcomes, enhanced labor productivity, lower utilization of government social services, higher civic and community engagement, or a reduction in crime rates.”

The report points to prior research done in 2016, which found that “if Kentucky students performed at the same level as those in Minnesota- the state with the highest performing students in the country – then gains to Kentucky’s  gross domestic product over the next 80 years could top $1 trillion or five times the current level.”

It may be possible that some officials aren’t overly concerned with the higher quality of life that increased individual earnings bring. But strictly looking at the tax revenues that flow from money spent on higher education, the research cited in the report is powerfully supportive of government’s investment in higher ed. 

For example: 

• People with a high school diploma had a lifetime earned income of about $630 thousand and paid about $19 thousand in income tax; $35 thousand in sales and excise tax and nearly $15 thousand in property tax for a total in tax revenues of over $68 thousand. 

• People with associates degrees by contrast, brought in nearly $912 thousand in earned income and the return to the state was nearly $40 thousand in income tax; over $45 thousand in sales and excises taxes and about $19 thousand in property taxes for a total in tax revenue of over $100 thousand. 

• Bachelor’s degree holders had a resounding leap in earned income, with an average of over $1.2 million in lifetime earned income, which sent back over $52 thousand in income tax; about $50 thousand in sales and excises  taxes and over $24 thousand in property taxes for  total tax revenue of over $127 thousand. 

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