THE ECONOMIC IMPACT OF THE LOS ANGELES COMMUNITY COLLEGES

The economic impact of the Los Angeles Community Colleges on the Los Angeles region is summarized in the following table:

A review of the literature on the economic impact of Community Colleges on their local service areas reveals several elements that make up the total effect of an educational institution on the economy of its surrounding area. We have selected these principal components for our analysis:

• Total District expenditures, including salaries, wages and benefits, along with supplies and operating expenses.
  
• The amount spent by students to support their education.
  
• The effect of community college education on the income of students after they leave college.

In 2001-02, expenditures of all District funds totaled $482,054,429. As stated above, this figure includes general fund accounts that include all salaries, benefits, operating expenses, etc. Specially funded programs, like EOP&S, Handicapped and Vocational Education Act Grants (but NOT Student Financial Aid), along with separate accounts such as cafeterias and bookstores, are also part of this total.

A large percentage of District income comes from state and federal sources outside the area. All but a fraction of expenditures are spent in the Los Angeles area. They indirectly generate further spending and income among businesses and individuals not directly connected to the District. To include this additional activity, a multiplier should be applied to District expenditures.

Assessments of the local economic impacts of other colleges have used multipliers ranging from 1.5 to 2.5. The smaller figure may apply to small individual colleges, most of whose expenditures are spent outside their immediate service area. The larger figure has been used for private colleges who obtain most of their students and funding from outside their service area. The Los Angeles Community College District has a large service area that absorbs almost all of its expenditures, while some of its revenue is obtained directly or indirectly from local sources. Therefore, a median figure of 2.0 seems most valid as a multiplier for District expenditures. When applied to the total District expenditures of $482,054,429, this multiplier produces a figure of $964,108,858 as the volume of business and personal income generated by District spending during fiscal 2001-02.

STUDENT SPENDING

In order that federal financial aid grants be allotted on the basis of need, each college must determine an amount needed each year by a full-time student to support his or her community college education, and use it as a basis for calculating grants. These amounts include the costs of books and supplies, transportation, room and board, and miscellaneous expenses such as child care. With the exception of room and board, which would occur even if the student were not enrolled, and college fees, which have already in effect been counted in direct District expenditures, the 2001-02 District estimate for student costs, was $3,492 per full-time student. To most accurately determine the impact of this student spending, the cost figure should be multiplied by the full-time-equivalent (FTES) of District students over a full academic year. In 2001-02, this full-year FTES count was 101,464.9. Multiplied by $3,492, we come up with an estimate of $354,315,570 for student costs in 2001-02. Added to the $964,108,858 multiplied expenditure, the amount of impact rises to $1,318,424,428.

The total so far indicates that the programs and operation of the Los Angeles Community Colleges pump more than a billion dollars into the Los Angeles economy every year. But this figure does not begin to measure the ultimate financial impact of the Colleges.

INCOME INCREASE DUE TO EDUCATION

In its tabulation of detailed population characteristics, the U.S. Census Report includes the relationship between income and levels of education. Two adjacent education levels are completion of 4 years of high school and 1-3 years of college. The latter category may include anyone who has attended a community college for any length of time, even for one course in one semester. The income differential between these two categories thus represents the bare minimum effect of community college instruction on personal income.

Published results of the 1990 census have included average income levels by educational attainment for the Los Angeles-Anaheim-Riverside metropolitan area. For all Los Angeles adults 18 and over, male and female, with earned income in 1989, the average income differential between 4 years of high school and 1-3 years of college was $4,782. Multiplied by the 2001 CPI, the adjusted figure becomes $6,484. This represents the minimum average income increase related to a community college education.

The full effect of this increment can best be measured if it is multiplied by the number of students that enter community colleges for the very first time. In 2001-02, 23,615 new students entered Los Angeles community colleges during the fall semester, and 17,479 entered in the spring, for a total of 30,479 entrants. Multiplied by the $6,484 increment, these students would generate $266,436,682 of additional income on an annual basis.

But this differential persists throughout their careers, since it applies to all age groups in the area. Even its annual impact can be measured only if the figure above is multiplied by a number of working years. To allow for some attrition, including a possible slight outflow of ex-students from the region, a conservative hypothetical career length of 20 years may be used. With this multiple, incoming students would generate $5,328,733,646 of income in constant dollars throughout their working lives. Since new students are entering Los Angeles community colleges in increasing numbers every year, and since hundreds of thousands of ex-community college student are working and earning in the Los Angeles area at any one time, this 20-year income increment can be considered an annual boost to the Los Angeles economy.

When this $5,328,733,646 is added to the $1,185,867,504 of direct infusion. a total of $6,514,601,150 is obtained as the annual dollar value of the Los Angeles Community Colleges activity in the Los Angeles economy.

Of course, community colleges confer other economic benefits that cannot so easily be assigned a specific annual dollar estimate. The extent to which local commerce, industry and public services are dependent on the colleges for a competent available work force is probably incalculable. Training for entry-level skilled positions is such areas as clerical, data-processing, and health occupation is most easily available in the colleges at minimal costs, and many of those who need more advanced post-secondary education are dependent on community colleges for lower-division course requirements. The Los Angeles economy has thrived in the face of international competition and an increasing need for advanced technological skills in the workforce, in part because of the high-quality and low-cost educational offerings so easily available at its community colleges. If the colleges cannot obtain the resources needed to expand and adapt to increasing demand and technological change, Los Angeles may lose its competitive edge in the world marketplace.

by Dexter Kelly, Research Analyst, Los Angeles Community Colleges