50 Chapter 3: Investment analysis However, instead of looking at just the tax revenue portion, we include all of the added earnings and business output. First, we calculate the students’ future higher earnings stream. We factor in student attrition and alternative education opportunities to arrive at net higher earnings. We again apply multipliers derived from Lightcast’s MR-SAMmodel to estimate the added labor and non-labor income created in the state as students and businesses spend their higher earnings and as businesses generate additional profits from this increased output (added student and business income in Figure 3.3). We also include the operations and student spending impacts discussed in Chapter 2 that were created in FY 2021-22, measured at the state level (added income from college activities in Figure 3.3.). The shutdown point does not apply to the growth of the economic base because the social perspective captures not only the state and local taxpayer support to the college, but also the support from the students and other non-government sources. Using this process, we calculate the present value of the future added income that occurs in the state, equal to $910.6 million. Recall from the discussion of the student and taxpayer return on investment that the present value represents the sum of the future benefits that accrue each year over the course of the time horizon, discounted to current year dollars to account for the time value of money. As stated in the taxpayer perspective, given that the stakeholder in this case is the public sector, we use the discount rate of 0.2%. Social savings Similar to the government savings discussed above, society as a whole sees savings due to external or incidental benefits of education. These represent the avoided costs that otherwise would have been drawn from private and public resources absent the education provided by SUNY WCC. Social benefits appear in Table 3.5 and break down into three main categories: 1) health savings, 2) crime savings, and 3) income assistance savings. These are similar to the categories from the taxpayer perspective above, although health savings now also include lost productivity and other effects Beekeeper analogy Beekeepers provide a classic example of positive externalities (sometimes called “neighborhood effects”). The beekeeper’s intention is to make money selling honey. Like any other business, receipts must at least cover operating costs. If they don’t, the business shuts down. But from society’s standpoint, there is more. Flowers provide the nectar that bees need for honey production, and smart beekeepers locate near flowering sources such as orchards. Nearby orchard owners, in turn, benefit as the bees spread the pollen necessary for orchard growth and fruit production. This is an uncompensated external benefit of beekeeping, and economists have long recognized that society might actually do well to subsidize activities that produce positive externalities, such as beekeeping. Educational institutions are like beekeepers. While their principal aim is to provide education and raise people’s earnings, in the process they create an array of external benefits. Students’ health and lifestyles are improved, and society indirectly benefits just as orchard owners indirectly benefit from beekeepers. In an effort to provide a more comprehensive report of the benefits generated by education, the model accounts for many of these external social benefits.
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