This study estimates the value of the private and public benefits that accrue to Minnesota residents from state government subsidies to higher education. In 2005, the University of Minnesota and the Minnesota State Colleges and Universities system received $832 million from Minnesota's state government to support educational programs. These subsidies allow these institutions to offer lower tuition rates, increasing the number of Minnesotans with bachelor and graduate degrees. We calculate that removing these subsidies would eventually lead to 14,000 fewer graduate degree holders in Minnesota, and reduce those with bachelor's degrees or "some college" by 42,000. The annual economic cost of these subsidies is about $326 million; this is less than annual state appropriations because most of those appropriations are income transfers from taxpayers to students, not an economic cost. We estimate that the annual value of the benefits of these subsidies is between $531 and $786 million ($381 and $570 million) when a 3% (5%) discount rate is used. We also discuss some of the income distribution consequences.
Bibliographical noteFunding Information:
The University of Minnesota is a publicly funded, land grant, research university. In the fall of 2006, it had an enrollment of 65,489 students. From the mid 1990s to 2006, undergraduate enrollment increased from about 35,000 to about 40,000, while graduate and professional school enrollment increased at a faster rate, from about 12,000 to about 19,000. Approximately 61% of University of Minnesota alumni of working age in 2005 resided in Minnesota, representing 8.7% of Minnesota's workforce. The University of Minnesota attracts students from other, mostly neighboring, states; 22% of its graduates are from other states. About 37% of these students stay in Minnesota after they graduate.
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- Cost-benefit analysis
- Distributional impacts
- Higher education subsidies
- Social benefits