New study reveals nonprofit private colleges add $700 million to Kentucky economy annually

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Kentucky’s private nonprofit colleges and universities add $700 million to the Kentucky economy each year and are responsible for creating nearly 10,600 Kentucky jobs, according to a new study commissioned by the Association of Independent Kentucky Colleges and Universities (AIKCU).

The economic impact report underscores the public benefits that a healthy private college sector provides to the commonwealth, calling the nonprofit private college sector both “one of the greatest economic and social bargains for the residents and taxpayers of Kentucky” and “one of Kentucky’s primary economic engines.”

Altogether, AIKCU’s 18 members are responsible for 10,588 Kentucky jobs with average salaries of nearly $49,000 per year (inclusive of benefits). The report breaks down the $700 million annual economic activity attributed to the private nonprofit college sector into direct, indirect, and induced economic effects as follows:

  • $404 million in direct effects from the employment of private college faculty and staff. AIKCU members directly employed 6,755 people (4,864 full-time,1,891 part-time) in 2014-15, with average wages (inclusive of benefits) of $53,674
  • $121 million in indirect effects, resulting from the purchase of goods and services necessary for the colleges’ operations. These indirect effects created 1,400 Kentucky jobs, with the average annual salary for these suppliers estimated at $38,915 (inclusive of benefits).
  • $175 million in induced effects resulting from the Kentucky economy’s response to the private colleges, with re-spending of the income received at the direct and indirect stages. This induced spending created another 2,443 Kentucky jobs with an average salary of $40,613 (inclusive of benefits)

These economic effects are felt throughout the state, with 85% of Kentucky’s population residing within a one hour drive of at least one private college. And although these nonprofit colleges are themselves tax-exempt, the report estimates their economic effects generate $24 million in Kentucky state and local taxes and $98 million in federal tax revenue annually.

“While this report doesn’t even attempt to measure our biggest contributions to the Commonwealth — the increased knowledge, civic engagement, and earning power of our graduates — it highlights the critical role our colleges play as employers, nonprofit businesses, and job creators throughout Kentucky,” said Gary S. Cox, president of the Association of Independent Ky. Colleges and Universities.

The AIKCU economic impact estimate employs a more narrow methodology than some other higher education economic impact studies. It does not factor in what the author identifies as “perhaps the greatest benefit AIKCU’s member institutions provide for the state of Kentucky” — the human capital that private college alumni add to the commonwealth’s economy through higher wages, increased tax revenue, improved health outcomes, and other factors. It also excludes the non-recurring economic benefits from capital construction projects; spending by students, alumni and visitors to the colleges other than tuition; the value of research, grant, or community service activities; and of course the many intangible social and cultural benefits these institutions provide their communities.

The AIKCU study was conducted by a practicing economist with more than 30 years experience in the field of economic development and updates a 2014 study by the same author. The report utilizes 2014-15 employment and wage data reported to the National Center for Education Statistics Integrated Postsecondary Education Data System (the most current data publicly available). This focus on the institutions’ recurring economic benefits derived from annual operations parallels the process many state governments use to evaluate the appropriateness of economic development incentives for new or existing businesses.

Download the full AIKCU 2014-15 Economic Impact Report.

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  1. oreo says:

    oreo

    New study reveals nonprofit private colleges add $700 million to Kentucky economy annually