2023

Economic Impact of AICU Mass

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Every institution of higher education has a case to make – to donors, alumni, students and their funders, prospective students and their guardians, and community members.

ESI was commissioned by the Association of Independent Colleges and Universities in Massachusetts (AICU Mass), representing 59 private, nonprofit institutions, to conduct an economic impact study of its   member institutions.

Using industry standard analyses, ESI found that AICU Mass members’ aggregate annual statewide economic impact is $71.1 billion, supporting over 320,000 jobs. It is also estimated that all that economic activity results in $2.4 billion a year in state tax revenues.

In addition to the statewide impacts, ESI also calculated the impact of each individual institution, as well as aggregate regional impacts for Eastern Massachusetts, Central Massachusetts, and Western Massachusetts.

However, these numbers do not fully account for the broader and catalytic gains produced by these institutions. Many of these colleges and universities are service-oriented, translating into thousands of hours of volunteer community service and addressing diverse community needs. The education provided by these institutions also contributes significantly to the vibrancy, resiliency, and competitiveness of Massachusetts, particularly as it trains up students in fields of study of strategic importance to the state and actively connects students to mentors and employers in Massachusetts’ prominent industry sectors.

Congestion Pricing in New York: How Will It Work?

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In April 2023, USDOT released the result of its environmental assessment of New York City’s proposed “Central Business Tolling” project—known more colloquially as “congestion pricing”—after years of examination and review. The result—a “Finding of No Significant Impact” or FONSI—means that the MTA can continue its process to implement a program to toll drivers for entering Manhattan below 60th St.

It’s supposed to have a monumental effect on travel and transportation throughout the New York Metropolitan region, and notably the program aims to accomplish two goals: fewer motor vehicles in Lower Manhattan and fewer motor vehicles traveling below 60th St., from River to River, and more dedicated money for the MTA, which is responsible for running transit and regional rail throughout New York and Connecticut.

Source: https://rpa.org/work/reports/congestion-pricing-in-nyc

 

How Will the Program Work?

The program would work similarly to this, and the final details are not yet finalized, but:

Motor vehicles that would enter Manhattan from the north, or by a connecting bridge or tunnel, would be subject to a fee—a toll of between $5 and $23—to enter the zone outlined in orange above, based on several factors, including time of day and consideration for freight vehicles, residents who live within the tolling zone, and low-income drivers.  More information can be found here, including over 29,000 pages of comments from concerned observers. The gist is that, if successful, New York City can be the first North American city to follow in the footsteps of London, Stockholm, Milan, and Singapore as cities around the world to successfully implement a charge.

What are the Program’s Goals?

According to the FONSI, the Tolling Program’s expected goals are as follows:

  • Reduce daily vehicle-miles traveled (VMT) within the Manhattan Central Business District (CBD) by at least 5 percent.
  • Reduce the number of vehicles entering the Manhattan CBD daily by at least 10 percent.
  • Create a funding source for capital improvements and generate sufficient annual net revenues to fund $15 billion for capital projects for the MTA Capital Program.
  • Establish a tolling program consistent with the purposes underlying the New York State legislation entitled the MTA Reform and Traffic Mobility Act.

The major goal is mode shift. The structure of the Tolling Program’s pricing mechanism is both incentives to take other means into and out of Lower Manhattan and deterrent for driving into one of the most congested business districts in the world. MTA would dedicate the collected revenue to fund nearly one-third ($15 billion over five years) of its plan to build more transit and make sure there are adequate and attractive options for regional travel.

How Do We Measure Congestion Pricing’s Success?

There are three important factors: what we choose to measure, how we choose to measure it, and how we interpret the results. Generally, the mechanism to compare how a project might perform is a benefit-cost analysis (BCA). The idea is relatively simple. A team of interested folks gathers a list of quantifiable benefits, which often include, but are not limited to:

  • Travel time savings: how will a reduction in congestion contribute to faster travel times for remaining drivers. How will this redistribution help save commuters who switched to another mode, too?
  • Reduced car crashes: the fewer the number of traveling vehicles, the lower the likelihood for incident.
  • Reduced noise benefits: fewer cars means potentially less noise.
  • Increased environmental benefits: directly related to both air pollution from car exhaust and particulate matter pollution from the paved asphalt.

A BCA’s execution can be wickedly complex to calculate and interpret correctly. How does the team estimate the number of motor vehicles that currently enter the area? How do they estimate the difference once the policy is put in place? Whose time are we measuring?

The goal is to quantify the benefits, extend them out to some point in the future—usually 30 years or more—and compare these benefits to the total cost of implementing the project.[1] This output is called a benefit-cost ratio (BCR) and is relatively easily interpretable in any context. If the BCR is more than 1, the benefits outweigh the costs, and if it’s less than 1, then the opposite is true. By itself a benefit-cost ratio is not a decision-making tool, but it can be used to compare the relative merit of two projects, or two alternatives for the same project. The team can seek to change inputs, like how much it charges to enter the congestion zone, and compare the outputs to optimize pricing, for instance.

Are There Other Places in the United States Ready for a Congestion Pricing/Tolling Program?

It is way too soon to tell. The program hasn’t been implemented in New York City yet, but it has been successful in other parts of the world—especially Singapore, which piloted a program in the mid-1970s and continues to faregate access to certain parts of its city to motor vehicles. It’s also been implemented in Northern and Southern Europe—London, Stockholm, Milan. In all transportation planning projects, context is king, so simply because one projects works in one place doesn’t mean it will work in any other place without considering a few factors, which include:

Historical Context. Has a program like congestion pricing been tried before? Was it successful? What’s driving this project here and now? What are the conditions of the place that might contribute to success?

Geography. What does the city/region physically look like? What would the congestion boundary look like. For example, London is a radial city—its boroughs spread from a central location and the congestion “zone” is somewhat circular. New York, however, is not. There was a conscious choice to limit the boundary to 60th Street and below, and to have it only cover Lower Manhattan, for now.

Political Will. This is potentially the biggest challenge for congestion pricing—telling the right story to the right stakeholders to understand what the tolling authority/agency wants to achieve is key. The coalition of politicians, riders, nonprofits, transit agency staff can make or break a successful program and it takes a champion and the ability to change minds to get a project this big and complex off the ground.

Let’s follow New York City closely as an exemplar and learn from its process. Other transit-starved cities and regions are looking closely.

 

[1] The BCA will seek to calculate the present values of costs and benefits, which simply considers inflation and the economic idea that a dollar today is worth some amount more than a dollar tomorrow, the next day, or next year.

 

Sam Sklar, Director | Sklar@econsultsolutions.com

Sam Sklar is a director with Econsult Solutions, Inc. (ESI). Mr. Sklar has extensive experience in program and project management, planning, and analysis. As an effective communicator, Mr. Sklar has special expertise in many forms of communications strategies. In addition to his duties at ESI, he publishes a growing newsletter, Exasperated Infrastructures, which covers state and federal infrastructure policy.

 

In Service to Coalitions of Higher Education

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Coalitions of colleges and universities often find it helpful to speak as a group, expressing the multitude of benefits they provide to a community and region, both economically and socially. And each institution has a unique case to make- to donors, alumni, students and prospective students, community members, and funders. ESI’s team regularly helps these consortiums to express a compelling message regarding the impact they produce at a local, regional, and global level, at a time when higher education seems to be under unprecedented scrutiny and yet simultaneously in high demand.

AICU Mass – 2023

For the Association of Independent Colleges and Universities in Massachusetts (AICU Mass) ESI was hired to conduct an economic impact study of all 59-member private, nonprofit colleges and universities. ESI found that AICU Mass members’ aggregate annual statewide economic impact is $71.1 billion, supporting over 320,000 jobs. It is also estimated that all that economic activity results in $2.4 billion a year in state tax revenues.

In addition to statewide impacts, ESI also calculated the impact of each individual institution, as well as aggregate regional impacts for Eastern Massachusetts, Central Massachusetts, and Western Massachusetts.

However, these numbers do not fully account for the broader and catalytic gains produced by these schools. Many are service-oriented, translating into thousands of hours of volunteer community service and addressing diverse community needs. The education provided by these institutions also contributes significantly to the vibrancy, resiliency, and competitiveness of Massachusetts.

Consortium of Universities of the Washington Metropolitan Area PILOT – 2013

A significant part of Washington D.C.’s vitality comes from the presence of a diverse array of institutions. ESI was retained by the Consortium of Universities of the Washington Metropolitan Area to perform an analysis of the economic and community impacts of the regions’ institutions. The study determined that the area’s universities are responsible for directly employing 68,000 people and about $2 billion in annual economic impact.

These contributions emerge from a deliberate effort on the part of the institutions in the district to meld the advancement of their educational and social missions within the district and its neighborhoods and residents.

 

Council for Christian Colleges & Universities – 2018

ESI was retained by the Council for Christian Colleges & Universities (CCCU), an international association of Christian institutions of higher education, to look at the collective impact of its U.S. members. Our work articulates the significant impact these institutions have on the national economy through annual operations and capital investments, the wage premium conferred on graduates, and additional benefits brought to local communities.

The faith-infused experience offered at CCCU institutions also transforms students and produces additional social benefit. Students are more likely than their peers to pursue degrees in socially beneficial professions such as education and human services, and CCCU graduates repay their student loans at rates well above the industry average. The institutions are also anchors in their communities, committed to producing many economic and social benefits at a local level.

Whether in service to a single college or university, or assisting a collective group, we stand ready to provide thorough and accurate research that helps convey the significant contributions these institutions produce. These associations play a vital role in advancing innovation, providing regional economic competitiveness, and equipping students and communities with the skills they need to build a more equitable future.

Lee Huang, President & Principal | Huang@econsultsolutions.com 

Lee Huang brings over 20 years of experience in economic development experience to ESI public, private, institutional, and not-for-profit clients. He leads consulting engagements in a wide range of fields, including higher education, economic inclusion, environmental sustainability, historic preservation, real estate, neighborhood economic development, non-profits, retail, state and local government, strategic planning, tax policy, and tourism/hospitality, and is a sought-after speaker on these and other topics.

The Cost of Doing Nothing: Federal and State Impacts of Insufficient Retirement Savings

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ESI was engaged by the Pew Charitable Trusts to explore the potential economic and fiscal costs of existing trends in retirement savings. As the elderly population of the United States continues to grow, it becomes increasingly important that households plan appropriately to maintain their living standards in their retirement years. This study quantifies the potential magnitude of national and state retirement savings shortfalls from 2020-2040 if current trends continue, defines the costs of these potential shortfalls to the U.S. and each state and its residents, and addresses the potential benefits of addressing the savings gap and helping future retirees enhance their financial resiliency. 

National population projections from the Census Bureau show that the nation’s elderly (65+) population is expected to increase by 50% from 2020-2040. As the population changes, so too will the relative composition of elderly and non-elderly households. There are projected to be 54 elderly households for every 100 working age households by 2040, up from 37 elderly households for each 100 working age household in 2020. This compositional shift will create significant fiscal pressure, since working age households form the core of the federal tax base. 

Under the continuation of current trends, 61% of elderly households are projected to have an annual income below $75,000 in 2040. Among these vulnerable households, the average annual income shortfall relative to recommended replacement levels is projected to be $7,050 in 2040.  

Financial modeling is used to put this income gap in context. Under standard financial assumptions, the average vulnerable household would need to contribute approximately $140 per month, or $1,685 annually, over a thirty-year period to close the projected retirement income gap. Additional modeling shows the potential impact of the enhanced Saver’s Credit and the importance of early savings in helping households to achieve income targets and maintain their established standard of living, and to illustrate how even modest levels of accumulated saving can help vulnerable households to manage their finances more effectively, improving financial outcomes and their quality of life.  

The retirement readiness of households also has significant implications for the trajectory of government expenditures on benefit programs. Program expenditures for senior supporting programs are expected to grow materially in the coming years due to the growing senior population and increasing medical costs. Based on analysis of the existing relationship between income levels and benefit received for elderly households, the study projects that achieving recommended income replacement levels for new retirees would reduce federal expenditures federal expenditures by an estimated $61 billion in 2040, and by $990 billion over the 20-year period from 2021-2040. Additional calculations are presented for demographic changes, potential income gaps, and program expenditures for each state.  

Economic and Social Impacts of University of North Carolina System Athletics

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ESI quantified the economic impact of the 15 University of North Carolina System Division of Intercollegiate Athletics Programs on the State of North Carolina. Collegiate athletics are an immense source of pride for these institutions and for the state as a whole. The aim of ESI’s research was to make sure it is understood that these athletics programs are also major generators of economic activity in communities throughout the state, and that these programs also contribute meaningful social impacts at a community, regional, and statewide level.

ESI estimated that direct and spillover impacts from UNC System Athletics produce $807 million in annual economic impact in North Carolina, supporting 6,340 jobs and $298 million in employee earnings. ESI also found the counties with the highest economic impact were Chatham, Durham and Orange counties and Wake County, all located in the northeast central region of North Carolina, generating $186 million and $169 million of impact, respectively. Pitt, Mecklenburg, Guildford, and Watauga were the following counties that produced a high economic impact well above $50 million each year.

Beyond the economic footprint described above, UNC System’s Athletics Programs also generate additional economic and social well-being for the state and communities throughout the state. Licensed merchandise, advertisement sales, increased alumni giving, and the growing number of student-athletes receiving “name, image, and likeness” payments all have positive implications for the state economy and local economies in the state. Furthermore, these athletics programs have a significant social influence, through community service, strong social cohesion among alumni, and the enhanced reputation of the state and its educational institutions. This too is part of the impact narrative for UNC System’s Athletics Programs.

In all these ways, UNC System Athletics delivers a substantial return on investment in the form of economic activity, jobs, and tax revenues generated within the local and state economy. It is also a flagship brand, ambassador, and community service provider within the state it represents, both on and off the field.

How Can We Convince the Public that a College Degree is Still Worth it?

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The Wall Street Journal and The Economist recently treated us to dueling perspectives on the value of higher education. The Wall Street Journal reported on a recent poll (in conjunction with NORC) revealing that 56% of Americans think a 4-year college degree is a bad bet—as recently as 2013, 53% had positive perceptions. The Economist retorted that this is not true for the average college graduate citing two perspectives which suggest that the return on the 4-year college degree remains strong. Who’s right? I suspect they both are. The key, like the devil, is in the details.

The Wall Street Journal is talking about perceptions, and it is hard to discount perceptions. Their survey says that the public perceives that higher education has lost its value. That perception is real and has consequences for institutions. This is especially important since the survey found that the most negative opinions of higher education were among 18–34-year-olds, the primary market for higher education. The Journal posits that the combination of rising tuitions, high student debt, and the pandemic are to blame. The last decade has seen a 15% decline in undergraduate enrollment. While enrollments rebounded ever so slightly this spring, there was a first-time in recent years decline in graduate enrollments. The customers of higher education perceive that there is a problem, and perceptions can lead to reality—lower enrollments.

The Economist counters that the return on investment for an undergraduate degree remains high, just slightly down from its all-time high in the early 2000’s (14% vs 16%). Nonetheless, they point out that where and what a student studies makes a difference (public university graduates outperform those from private institutions and STEM majors outperform those from the humanities). So, if the return on investment remains positive but public perceptions have turned negative, what are institutions to do?

First, colleges and universities need to take a hard look at both their communication strategies and their programming. Currently, universities are losing the public perception battle with ideological groups who argue that higher education is shaping American youth for the worse. Individual institutions can respond to this challenge, but it will take collective action from the Academy in general to win against a well-organized and well-funded movement.

Second, there is a reality to the investment perception. Too many students graduate (or fail to graduate!) with degrees in areas that will not help them succeed in the workplace. Most institutions need to analyze and revise their academic portfolios. They need to invest more in those disciplines whose majors are graduating and successful. This is not to suggest that we should eliminate all majors in the humanities. On the other hand, it is reasonable to ask all disciplines to assess the workplace outcomes of their academic programs. I am familiar with a prominent university that eliminated its computer science program when it realized that the program was not producing graduates comparable to its other programs. Furthermore, small colleges may need to partner with each other to expand their abilities to offer innovative and workplace relevant programming. The Low-Cost Model Consortium’s shared courses and programs is a good example of such a strategy.  Ultimately, mergers of individually unsustainable institutions or acquisitions of such institutions by larger institutions may be required. Arizona State University’s purchase of Thunderbird School of Global Management is an exemplar.

Similarly, I am not suggesting that private colleges should close because public institution graduates outperform theirs. Obviously, a large percentage of our prestigious and effective institutions are private.  There are, however, many small privates whose students struggle to graduate and to find a path to success in the workplace. To reiterate, small institutions need to take a hard look at their program portfolios. They should develop opportunities to ensure that their students can major in areas that lead to good workplace outcomes. The number of STEM majors at even the highly selective liberal arts colleges are increasing dramatically, and many of these schools are also developing programs that integrate the humanities and computer science, for example, yielding humanities graduates who compete quite well in the workplace. There are many other program integration strategies that can increase the workplace success of graduates.

These are challenging times in higher education. Attacks are coming from all fronts. Enrollment declines are serious and, because of demographic declines, are likely to continue. Despite Americans losing faith in college education, a college degree is definitely worth it. It is up to colleges and universities to tell the story loudly and convincingly and to make sure that a degree retains its value in the workplace. These are not easy tasks or easy decisions. We need to undertake them, nonetheless.

Dr. Elmore Alexander, Senior Advisor | Alexander@econsultsolutions.com

Elmore Alexander

Dr. Alexander is Dean Emeritus of the Louis Ricciardi College of Business at Bridgewater State University in Bridgewater, MA. This follows Dr. Alexander’s service to the University as Dean and Professor of management. Dr. Alexander has had an illustrious career in higher education focused in business and organizational management. Prior to joining Bridgewater State University, he served in high-level posts as well as being a professor for the business schools of Marist College (for which he also served as Acting Dean for the School of Science), Philadelphia University, Johns Hopkins University, American University, and University of Memphis.