Editorials, detail

"Ohio Education: Subsidy Or Investment?"

by Luis M. Proenza, President
The University of Akron

Columbus Dispatch - January 25, 2000
Cleveland Plain Dealer - January 28, 2000
Akron Beacon Journal - February 7, 2000

If there was one thought that dominated financial activity as the millennium drew to a robust close, it was simply this: Invest. Anyone who scanned the shelves in major bookstores might well have been overwhelmed by the many writers who committed themselves to yet one more slant on how to turn your money into...well...a lot more money! Tantalizing titles appeared, such as Live Rich, and 24 Essential Lessons for Investment Success, and The Visual Investor; or still more curious, The Psychic Investor.

Not to be outdone, Money magazine declared on its cover, "The Best Investments for 2000," while Business Week's cover was only slightly less boastful with "Smart Investments for the Internet Age." Whether in more traditional industries or in the dizzying array of Internet stocks, there seemed to be no end to our society's preoccupation with turning a dollar into two, or maybe 1,002!

Lamentably, one of the nation's best places for a solid return-on-investment didn't show up in any of the experts' crystal balls-higher education.

Indeed, in Ohio, education is seldom mentioned in the same breath with investment. Rather, the state's appropriation for higher education is called an "instructional subsidy"-a gross misnomer suggesting an obligatory gesture no different than the many entitlements in the state budget.

This subsidy syndrome about education appears to have deep roots. Back in 1960, for example, a widely circulated study by Dr. George Thatcher, the former chairman of economics at Miami University of Ohio, turned up some disturbing facts about Ohio's dismissive attitude toward education. Although the state's personal income ranked 5th in the nation, its per capita support of higher education ranked near the bottom. Today, the figures are hardly more encouraging: Ohio is still near the bottom in per capita support for higher education, and, predictably, it has dropped to 22nd in personal income! Clearly, Ohio's subsidy mentality has had time to work its course during the last 40 years, and apparently for the worse. Thus, there should be little doubt that this idea of subsidy in educational spending is one that must change dramatically, and quickly, if our campuses are to serve as Ohio's most powerful engine for economic development.

Did I say economic development? I did, and here's why: Economists agree that research (i.e., the production of new knowledge), as occurs daily on our campuses, is the most direct avenue for creating new wealth. When that new knowledge is taught and then quantified in a market environment, it creates fuller employment, capital formation, growing profits, and surpluses for reinvestment. In other words, it is from research that new companies are born and new jobs are created. It is from research that the economy expands and new wealth is created.

How much new wealth? Studies conducted at The University of Akron show that the direct return to the state on each dollar spent on higher education is $1.84. By any measure, a nearly two-to-one return on investment is exceptional, but that represents only the extra taxes paid by individuals. In addition, the economy obtains significant other returns when upgraded educational levels and enhanced research outputs are expressed in the marketplace-returns which economists estimate at as much as 50% to 60% per year!

And there are yet other economic and social benefits to be counted, such as the savings from the many costs otherwise associated with a lack of educational attainment-including unemployment, welfare, crime, and the like. The cost, for example, of keeping a person in prison is more than $30,000 per year, as compared to education-the most effective crime prevention factor-which costs the state about $5,000 per year. As Derek Bok has often said: "If you think education is expensive, try ignorance."

That Ohio suffers from a serious educational deficit is evident from its standing in the educational attainment of its citizens. The state is below the national average in residents with bachelor's and graduate degrees - a condition which has been steadily worsening right along with personal income. According to the Ohio Board of Regents, the state would need nearly one-quarter of a million more college graduates just to reach the national average.

If the concept of an educational deficit sounds like fuzzy logic, consider this: The most recent figures from the Current Population Survey (1997) showed that Ohioans with only a high school degree earned an average annual income of $23,600. The average income for those with a bachelor's degree was $42,500 and for those with more than a bachelor's, $52,800. From these income figures, it is not difficult to conclude that closing the educational deficit could add almost one-quarter of a million more higher-wage earners to the tax rolls. And other investment returns would be generated, as virtually every economic wheel also is turned by the added human resources nurtured on our campuses.

Education, then, is society's infrastructure-the internal system that, much like all of those tiny pieces in a fine watch, makes our society work. Education is infrastructure because through the engagement of students, it creates knowledgeable individuals that can apply analytical and problem-solving skills to shape our industries and our society; it creates the ideas and technologies that shape the industries of the future; and it enables both personal and economic progress.

So here is the irony: Why does our state choose to think pejoratively about education (subsidy is not a "good thing" in today's competitive marketplace)? Why, when in so doing, Ohio not only conveys its own ignorance of the facts, but worse, it perpetuates an approach that will doom the state to self-imposed economic mediocrity?

Given the competitive awakening that already has occurred in many other states, Ohio will be forced to play catch-up before it can even think about moving to a level of leadership for the high economic stakes that are on the table. And here I cannot escape a personal irony in that 20 years ago, as assistant to the president of the University of Georgia, I was advising that state to emulate Ohio, which had then just taken some innovative steps in economic development. Today, I find myself telling Ohio to emulate Georgia because during these last 20 years that state has made many progressive investments. Georgia's HOPE Scholarship Program, for example, has sent thousands of additional students to college, and, by requiring a 3.0 grade point average for eligibility and continued support, it has created powerful performance incentives for both schools and students. Another example is the Georgia Research Alliance, a program that has attracted exceptional researchers to the state, leveraged hundreds of millions of dollars in federal research support, and catalyzed the formation of new companies. As a result of these programs, Georgia has generated immense economic gains, and the state's personal earnings have been steadily rising.

These kinds of investments, like those made by many other states, contrast sharply to Ohio's lagging investments in higher education. Indeed, based on such comparisons, we should all be calling for a "report card" on Ohio.

So the choice is ours: Do we invest? Or do we continue to pretend that "subsidy" is the operative word to disguise the reality of the state's biggest challenge in the new millennium?

To borrow from a familiar cliche:

We can pay now.

Or we can pay for it later - in more ways than one.

The University of Akron

Akron, OH 44325
Phone: 330-972-7111
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