FRANKFORT, Ky. (Oct. 20, 2014) — Kentucky’s non-profit private colleges add nearly $618 million to Kentucky’s economy each year, creating more than 1o,400 jobs, according to a new study commissioned by the Association of Independent Kentucky Colleges and Universities (AIKCU).
“Most people understand how important Kentucky’s 19 private non-profit colleges and universities are in Kentucky’s overall system of postsecondary education,” said Gary S. Cox, president of AIKCU. “After all, taken together our members educate more students than the state’s flagship and produce a little more than one in five bachelor’s degrees awarded in Kentucky, with even larger percentages of bachelor’s degrees in fields like nursing and education. But sometimes the economic value these colleges and universities bring to the Commonwealth is less obvious. We hope this study helps folks see how important these small colleges are to Kentucky’s overall economy.”
The study quantifies this economic impact and documents the outsized return on investment Kentucky captures on its relatively small investment in student financial aid to private college students. Kentucky resident students attending Kentucky’s private non-profit colleges are eligible for state financial aid and receive about $57 million in financial aid each year through programs administered by the Kentucky Higher Education Assistance Authority (KHEAA). That is less than 5% of Kentucky’s overall spending in support of postsecondary education.
In terms of the state’s return on that investment, the report notes: “AIKCU’s member institutions provide both economic benefits and social benefits to Kentucky without direct state appropriations for the operation of these institutions. This may make the AIKCU’s member institutions one of the greatest economic and social bargains to the residents and taxpayers of Kentucky”
The $617.6 million that Kentucky’s non-profit, private colleges and universities add to Kentucky’s state gross domestic product (GDP) annually breaks down as follows:
Direct benefits: $354 million
▪ $344 million in direct wages and benefits
▪ 7,037 total employees (4,898 FT); average annual wage + benefits = $48,920
Indirect benefits (dollars spent with Kentucky businesses that continue to recirculate in Kentucky): $102 million
▪ 1,166 Kentucky jobs exist because of AIKCU members’ operations.
▪ Wages + benefits of these indirect jobs = $47+ million; average $40,600 annually
Induced benefits (response by Kentucky’s economy to direct and indirect): $162 million
▪ 2,231 induced Kentucky jobs
▪ Induced wages + benefits = $89 million; average annual wage + benefits = $39,370
Tax revenue generated: $108.5 million
▪ $27.5 million in estimated Kentucky state and local tax revenue (annual)
▪ $81 million estimated federal tax revenue (annual). Approximately $51 million of the federal taxes are social insurance tax (primarily Social Security)
The narrow methodology used by the objective outside consultant for this study is exactly the same methodology used by the Kentucky Cabinet for Economic Development to evaluate companies seeking economic incentives from the Commonwealth of Kentucky. This is a much more conservative approach than the methods used by some other higher education economic impact studies.
While the numbers are impressive, they are by no means a comprehensive evaluation of the broad array of economic, cultural and social impacts that AIKCU members provide. The conservative approach of this study excludes capital projects and focuses only on the economic benefits derived from the institutions’ annual operations, using 2011-12 employment and wage data reported to the National Center for Education Statistics Integrated Postsecondary Education Data System (IPEDS).