Impact of UNC system on state's economy disputed

The UNC system benefits the state’s economy by as much as $10.4 billion, according to a study completed by N.C. State University economics professor Michael Walden.

Walden was asked to present updated findings of his study at last month’s UNC-system UNC Board of Governor’s meeting.

But economists have criticized Walden’s analysis, and some Republican state legislators believe his work was commissioned to defend public funding for higher education, rather than to provide accurate data for decision makers.

Rep. Rick Glazier, D-Cumberland, said distrust between legislators and higher education leaders has become common since budget cuts began five years ago.

“We are at a very adversarial time, and that’s unfortunate,” he said.

Contested findings

Walden’s $10.4 billion claim comes from his study, published in January 2009 as part of the UNC Tomorrow Initiative, a long-term strategic plan for the university system. The study used 2006 as a benchmark for measurement.

Last month, Walden updated and spoke about his findings at a Board of Governors meeting that was centered around tuition and fee increases and financial aid.

But economists have criticized Walden’s analysis, particularly a claim that for every $1 invested in the system by the N.C. General Assembly, the state receives between $1.37 and $2.11 in tax revenue.

“Economic impact studies, like Dr. Walden’s, are fundamentally misleading,” said Jay Schalin, director of state policy at the Pope Center for Higher Education Policy, a conservative think tank.

Schalin said the study ignores marginal thinking, meaning it assumes the first dollar spent on the university has the same impact as the last dollar spent.

“Policy makers are therefore making poor decisions,” he said. “They are feeling that they can address the economic needs of the state simply by throwing money at the university system.”

John Siegfried, professor of economics at Vanderbilt University, has written about economic impact studies such as Walden’s and said they rarely accurately measure the value of universities.

Siegfried said that these studies are generally used to manipulate public opinion and has recommended that some groups stop doing them.

Walden defends his analysis, arguing that his study underestimates the value of the UNC system.

“We’re not hypothesizing, speculating or estimating; we use real life jobs that graduates have gotten,” he said.

Sinking trust

Paul Fulton, a member of the board, said he believes Walden’s analysis is accurate.

“I don’t have any reason to question his methodology or the results.”

But Fulton also said in an era of yearly budget cuts to higher education, the system must prove its value to the state.

“Education is constantly under pressure,” he said. “You commission studies to try to prove a point.”

The legislature has cut more than $1 billion from the UNC system’s budget during the last five years. These cuts have contributed to the increasingly adversarial relationship between the system and the General Assembly, Glazier said.

“There’s always going to be some tension between the university and the funder — the public,” he said.

Further budget cuts would harm the quality of the university system, but also deepen the distrust between legislators and higher education leaders, he said.

Walden’s study has contributed to this tension, as some legislators say the system should focus on cutting costs.

Rep. Hugh Blackwell, R-Burke, said he was skeptical of the study’s findings. He said the system should be looking for further cost-savings, instead of doing studies like Walden’s.

“I would be much more impressed with the university stepping up and saying in this economy we can’t continue to spend what we’ve been spending,” he said.

Blackwell said the 2009 Bain & Co. study of UNC-CH’s administrative effectiveness, which found $66 million in yearly savings, is proof that universities are not doing enough to cut costs.

Sen. Jerry Tillman, R-Montgomery, was also skeptical of the Walden study’s findings, but said the university system usually provides accurate information.

“If we’re putting state dollars out there, we’re always looking to get accurate statements and reports,” he said. “Generally speaking, we get the requested information, but there are things we have to scratch our heads on.”

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