Professor testifies before Senate committee about college affordability

College Affordability in Illinois Testimony

Prepared for the Illinois General Assembly Senate Committee of the Whole

June 16, 2015

Springfield, IL

Dr. Jennifer A. Delaney

University of Illinois at Urbana-Champaign

Thank you for the opportunity to address this body on the important topic of College
Affordability in Illinois. I am honored to have been asked to testify today. I am Jennifer Delaney,
an Assistant Professor in the higher education program in the Department of Education Policy,
Organization and Leadership at the University of Illinois at Urbana-Champaign. I have spent my
scholarly career conducting research on higher education finance and college affordability. I
come before you today as a researcher, not as a representative of the institution where I work.

My testimony today will focus on the benefits of higher education.

There was a time in America in which individuals could leave high school and expect to live a
middle class lifestyle. This was possible a generation ago working for the auto industry, or a
generation before that working for the railroads. In those days individuals who attended college
were better off than those who did not, but attending college was not a requirement for achieving
a middle class lifestyle.

Today the world has changed. Higher education has become more important as a path to upward
mobility. The number of viable pathways to the middle class has shrunk with the erosion of the
value of a high school credential and the closing of manufacturing industries that once provided
stable jobs. This has made higher education increasingly important as a pathway to the middle
class.

Even famous college drop outs, like Bill Gates, are now urging individuals to finish college. In a
June 3, 2015 blog posting, Mr. Gates wrote, “Although I dropped out of college and got lucky
pursuing a career in software, getting a degree is a much surer path to success” (Gates, 2015).
And he is right. Getting a college degree is the best way to ensure that an individual will either
become or remain middle class – or reach greater heights.
In my remarks today, I have been asked to focus on the benefits of higher education for
individuals. I will consider the best, current research on how these individual benefits directly
benefit the state of Illinois and how these benefits enhance individuals’ lives both in the labor
market and in civic society. I will not speak on other types of benefits of higher education, such
as the benefits produced by scholarly research and inventions. However, I have no doubt that
these benefits are considerable. I have provided an extensive bibliography at the end of my
written remarks so that any member, or their staff, can delve further into any of the research
findings that I highlight.

Benefits to the State of Illinois

I will first discuss research on the benefits of higher education to the State of Illinois.
Quite simply, there is no other investment that the state can make that will yield the returns of
investing in education at all levels. Unlike other state budget categories, spending on higher
education is an investment that will yield returns in future years. Investment in higher education
results in increased sales and income tax revenues for the state. It also means less spending in
other state budget categories such as healthcare and corrections.
In a report from earlier this year, the Georgetown University Center on Education and the
Workforce highlighted the growing importance of a college educated workforce in America. “In
1967, people with Bachelor’s or graduate degrees represented a little more than 10 percent of the
workers and a little more than 20 percent of the wages. … By 2012, workers with a college
degree or better grew to more than 30 percent of the workers and produced more than half the
earnings in the economy” (Carnevale & Rose, 2015, executive summary, p. 2).
Not only are college-educated workers of increasing importance to the economy, but we have
also seen both earnings stagnation among those without postsecondary training and widening
income inequality. In a 2015 Journal of Education Finance article, Dr. Walter McMahon, my
colleague at the University of Illinois, wrote, “In the U.S. the 64% of the population that have
high school or less have real earnings that have been flat and falling since 1980. … Those with
college degrees have had a 49% increase in their real earnings since 1980” (McMahon, 2015c).
The higher education investment decision that is made by this body is not just important for
Illinois, but also for the nation. As the fifth most populous state in the nation, the investment that
Illinois makes will help shape postsecondary opportunities for a large portion of the current
generation of Americans. According to the most recent National Association of State Student
Grant & Aid Programs annual survey, Illinois is the fifth largest provider of need-based grant aid
in the nation through the Monetary Awards Program, or MAP grant, and provides approximately
5.3% of the total national investment in need-based undergraduate grant aid by states. Neither the
state nor the country as a whole can afford to lose the opportunities that these funds provide for
individuals to attend college.

Individual Benefits of Higher Education

I next consider the benefits individuals receive from postsecondary attendance.
In a 2007 Harvard Education Review article, Bridget Terry Long and her coauthor called the
decision to attend college the “Million Dollar Question”. They wrote that “on average, people
with a bachelor’s degree will earn $1 million more over the course of their lifetimes than those
with only a high school diploma” (Long & Reiley, 2007, p. 39). The increased earnings of $1
million over a lifetime is like winning the lottery. Except that it isn’t. Unlike winning the lottery
by chance, this $1 million extra in wages is earned through hard work. Students gain important
skills, increase their ability to adapt and be retrained in an ever-changing workplace, and, most
importantly, the knowledge and skills earned can never be taken away or lost.
Dr. McMahon’s research has shown that “Associate degrees currently yield a 16.6 percent rate of
return based on increased earnings, and bachelor’s degrees yield 14.1 percent” (McMahon,
2015a). This approximately doubles the 7.99 percent 10-year average for S&P 500 index funds, a
standard benchmark for the cost of taxed funds. In fact, few investments have such a large
sustained return—both for the individual and society.

And the benefits to both individuals and civic society from obtaining postsecondary training are
not just found in the labor market. Research has also shown that people with at least some
college have better health, higher personal savings, better asset management, longer life
expectancy, lower crime rates, better spousal health, children who do better in school, more
engagement in civic institutions through increased voter registration and voting rates, and other
related positive outcomes that benefit communities, states, and the nation as a whole (McMahon,
2009; Baum, Ma, & Payea, 2013).

The Costs of Cuts to Higher Education

The financial and civic benefits of having an increasingly well-educated workforce directly
benefit the state of Illinois and individual citizens of the state. The only way that the state will
continue receiving the benefits of higher education is to continue providing opportunities for
individuals to obtain postsecondary education. This year, 37 states are increasing their
investment in higher education. Some are even investing to such an extent that higher education
funding has crested pre-recession levels such as in Alaska, Wyoming, and North Dakota,
according to a report from the nonpartisan Center on Budget and Policy Priorities (Mitchell &
Leachman, 2015). Illinois should not fall behind.

The Cost of Cuts. Dr. McMahon has calculated the cost of a cut in higher education spending for
the State of Illinois this year. He estimates that an 8.5% cut in higher education spending would
result in lost economic activity such that state sales and income tax revenue would be reduced by
approximately $41.5 million. And the related increased Medicaid, welfare, prison, and other
associated costs from the state having a less well-educated workforce would increase the state
deficit in future years by $24 million (McMahon, 2015b). Dr. McMahon wrote, “In short, cutting
higher education eventually makes Illinois’ fiscal crisis worse” (McMahon, 2015a).
It is my understanding that possible cuts to higher education in Illinois this year might be much
larger than 8.5% – and the corresponding costs to the state, especially the long term costs, would
be correspondingly higher.

The Costs of Volatility. I will also argue that the unpredictability of state funding for higher
education is concerning. In some of my research, I have shown that state budgeting for higher
education has become increasingly volatile over time (Doyle & Delaney, 2009; Doyle &
Delaney, 2011). This “new normal” of volatile funding is problematic for institutions to be able
to plan and set budgets. It is also problematic for students and families since unpredictable state
funding can often lead to the short term fix of a tuition increase. I think that state and higher
education leaders need to discuss not only the level of funding but also the predictability of state
funding for higher education (Delaney & Doyle, 2007; Delaney & Doyle, 2011; Doyle &
Delaney 2009; Doyle & Delaney, 2011).

As I wrote in a 2014 paper, “Today greater effort is required for families to send a child to
college than was needed in prior generations. College is both more expensive and consumes a
larger percentage of median household income for the average American family today than at
any point in the previous four decades” (Delaney, 2014). Hence, continued state investment is
needed for more individuals and the state to continue to enjoy the benefits of higher education.
Thank you again for the opportunity to testify on this important topic today.

References

Baum, S., Ma, J., and Payea, K. (2013). Education Pays 2013: The Benefits of Higher Education
for Individuals and Society. New York: The College Board.
https://trends.collegeboard.org/sites/default/files/education-pays-2013-full-report.pdf (viewed on 6/14/2015).

Carnevale. A. P. & Rose, S. J. (2015). The Economy Goes to College: The Hidden Promise of
Higher Education in the Post-Industrial Service Economy. Washington, DC: Georgetown
University Center on Education and the Workforce. https://cew.georgetown.edu/wpcontent/uploads/EconomyGoesToCollege.pdf
(viewed on 6/14/2015).

Delaney, J. A. (2014). The Role of State Policy in Promoting College Affordability. The Annals
of the American Academy of Political and Social Science, 655, 56-78.
http://ann.sagepub.com/content/655/1/56.abstract (viewed 6/14/2015).

Delaney, J. A. & Doyle, W. R. (2011). State Spending on Higher Education: Testing the Balance
Wheel over Time. Journal of Education Finance, 36(4), 343-368.
https://muse.jhu.edu/journals/journal_of_education_finance/summary/v036/36.4.delaney01.html (viewed 6/14/2015).

Delaney, J. A. & Doyle, W. R. (2007). The Role of Higher Education in State Budgets. In D. E.
Heller, & K. M. Shaw (Eds.), State postsecondary education research: New methods to inform
policy and practice (p. 55-76). Sterling, Virginia: Stylus Publishing.
http://www.amazon.com/State-Postsecondary-Education-Research-Practice/dp/1579222110
(viewed 6/14/2015).

Doyle, W. R. & Delaney, J. A. (2009). Playing the Numbers: Higher Education Funding – The
New Normal. Change: The Magazine of Higher Learning, 41(4), 60-62.
http://www.changemag.org/Archives/Back%20Issues/July-August%202009/abstract-playingthe-numbers.html (viewed 6/14/2015).

Doyle, W. R. & Delaney, J. A. (2011). Bouncebacks in Higher Education Funding: Patterns in
Length of Time to Recovery Following Cuts in State Appropriations. WISCAPE Policy Brief.
Madison, WI: University of Wisconsin–Madison, Wisconsin Center for the Advancement of
Postsecondary Education (WISCAPE).
https://www.wiscape.wisc.edu/wiscape/publications/policy-briefs/pb012 (viewed on 6/14/2015).

Gates, B. (June 3, 2015) “Help Wanted: 11 Million College Grads” gatesnotes: The Blog of Bill
Gates. http://www.gatesnotes.com/Education/11-Million-College-Grads (viewed on 6/12/2015).
Long, B. T. & Riley, E. (2007). “Financial Aid: A Broken Bridge to College Access?” Harvard
Education Review 77(1), 39-63.
http://isites.harvard.edu/fs/docs/icb.topic1233004.files/Long%20Riley%202007%20Financial%20Aid%20-%20A%20Broken%20Bridge%20to%20Access%20-%20HER.pdf (viewed on 6/12/2015).

McMahon, W. W. (2009). Higher Learning, Greater Good: The Private and Social Benefits of
Higher Education. Baltimore, MD: Johns Hopkins University Press.
https://jhupbooks.press.jhu.edu/content/higher-learning-greater-good (viewed on 6/14/2015).

McMahon, W. W. (2015a). Higher Education is a Smart Investment for Illinois. Institute of
Government and Public Affairs: University of Illinois. http://igpa.uillinois.edu/budgettoolbox/content/higher-education-smart-investment-illinois (viewed 6/12/2015).

McMahon, W. W. (2015b). Illinois Budget Policy Toolbox: Benefits and Costs of State Budget
Changes to Higher Education. Institute of Government and Public Affairs: University of Illinois.
http://igpa.uillinois.edu/sites/igpa.uillinois.edu/files/toolbox-budget/files/McMahon-HigherEducation.pdf (viewed 6/13/2015).

McMahon, W. W. (2015c). Financing Education for the Public Good: A New Strategy. Journal
of Education Finance, 44(4), 414-437.
http://muse.jhu.edu/journals/journal_of_education_finance/

Mitchell, M. & Leachman, M. (2015). Years of Cuts Threaten to Put College out of Reach for
More Students. Washington, DC: Center on Budget and Policy Priorities
http://www.cbpp.org/research/state-budget-and-tax/years-of-cuts-threaten-to-put-college-out-ofreach-for-more-students#_ftnref50 (viewed 6/14/2015).