Wor-Wic is training a workforce, returning big dollars

On Route 50 east of Salisbury, one of the Lower Shore’s biggest economic engines quietly goes about its purpose of pumping dollars in the community, while also creating repeated cases where people tap into their income-earning and quality-of-life potential.

Wor-Wic Community College is celebrating its 40th anniversary this year. Just in time to mark the occasion, a recent economic impact study shows that — more than ever — the college plays an overwhelmingly crucial role in the local economy.

Statistics from the study show students benefit from improved lifestyles and increased earnings. The average Wor-Wic student’s income, for example, increases by $4.10 for every dollar invested in the college.

Students also see a 17.1 percent average rate of return on their Wor-Wic educational investment, recovering all costs within just over eight years.

The wholly independent report prepared by EMSI, an economic modeling consultant based in the Midwest that examines similar higher-learning institutions, also found that local taxpayers benefit from a larger economy and lower social costs aided by Wor-Wic’s teaching programs and results.

For every dollar appropriated by state and local governments to Wor-Wic, taxpayers see a return with a cumulative added value of $2.90 in the form of higher tax revenues and avoided social costs, according to the report.

State and local governments save approximately $93,900 in avoided social costs each year, including savings associated with improved health, lower costs of law enforcement and fewer welfare claimants.

Additionally, state and local governments receive a rate of return of 11.5 percent on their investments in Wor-Wic.

EMSI also concluded that the Lower Shore community as a whole benefits from increased job and investment opportunities, higher business revenues, greater availability of public funds and an eased tax burden.

Wor-Wic’s service area economy annually receives $17.3 million in income due to Wor-Wic operations. Total annual impacts on Wor-Wic’s service area add up to $149.1 million. The total impact represents 2.7 percent of the total regional economy and roughly 3,930 average wage jobs.

Wor-Wic activities encourage new business, assist existing businesses and create long-term economic growth. The college enhances worker skills and provides customized training to local business and industry.

Wrote the report’s authors: “The results of this study demonstrate that Wor-Wic is increased tax revenues from an enlarged economy and a sound investment from multiple perspectives. The reducing the demand for taxpayer-supported social college enriches the lives of students and increases their services. Finally, it contributes to the vitality of both lifetime incomes. It benefits taxpayers by generating the local and state economies.

“The results of this study demonstrate that Wor-Wic is a sound investment from multiple perspectives. The college enriches the lives of students and increases their lifetime incomes. It benefits taxpayers by generating increased tax revenues from an enlarged economy and reducing the demand for taxpayer-supported social services.”

EMSI applies a comprehensive model designed to quantify the economic benefits of the community college. The economic impact model has been field-tested community and technical colleges and translate these to generate more than 900 studies for community, into common sense benefit/cost and investment terms.

Education affects earnings

Benefits of higher education are most obvious from the student perspective: students on average sacrifice current earnings — as well as money to pay for tuition — in return for a lifetime of higher income.

Compared to someone with a high school diploma, associate’s degree graduates earn $9,100 more per year, on average over the course of a working lifetime.

From an investment standpoint, Wor-Wic students  enjoy a 17.1 percent rate of return on their investments of  $40,000 in time and money. Ironically, this actually compares favorably with returns on other investments, such as long-term return on stocks and bonds.

The corresponding benefit/cost ratio is 4.1 — for $10,000 every dollar students invest in Wor-Wic education, they receive a cumulative of $4.10 in higher future income over their working careers. This is a real return that accounts for any discounting that occurs during the entire period. The payback period is 8.2 years.

The study makes a case that from the perspective of society as a whole, the benefits of education accrue to different publics. For example, Wor-Wic students expand the state’s economic base through their higher incomes, while the businesses that employ them also become more productive through the students’ added skills.

These benefits, together with the associated ripple effects, contribute an estimated $18.6 million in taxable income to the Maryland economy each year.

As they achieve higher levels of education, Wor-Wic students are also less likely to smoke or abuse alcohol, draw welfare or unemployment benefits, or commit crimes. This translates into associated dollar savings (avoided costs) to the public equal to approximately $945,700 annually.

These are benefits that are incidental to the operations of Wor-Wic and accrue for years into the future, for as long as students remain active in the workforce.

During the report’s survey period of Fiscal 2012, $13.2 million was the amount that state and local taxpayers spent in to support the college. Following this procedure, according to the analysts, it is estimated that Wor-Wic provides a benefit/cost ratio of 27.4 — which means every dollar of state and local tax money invested in the college today yields a cumulative of $27.40 in benefits that accrue to all Maryland residents, in terms of added taxable income and avoided social costs.

Taxpayer perspective

Taxpayers can be pretty tough to convince when it comes to embracing public spending on education. Under the study’s taxpayer perspective, only benefits that accrue to state and local governments are counted, namely, increased tax collections and reduced government expenditures.

For example, in place of increased income, the taxpayer perspective includes only the increased state and local tax receipts from those higher incomes. Similarly, in place of overall crime, welfare, unemployment and health savings, the taxpayer perspective includes only those that translate to actual reductions in state and local government expenditures.

The report’s writers point out that government often undertakes activities wanted by the public, but which may be unprofitable in the marketplace. This means that positive economic returns are generally not expected from government investments.

Student Productivity Effect

Every year, students leave Wor-Wic and join or rejoin the regional workforce. Their added skills translate to higher income and a more robust Wor-Wic Service Area economy.

Based on Wor-Wic’s historical enrollment and credit production over the past 30-year period, it is estimated that the accumulated contribution of Wor-Wic instruction received by former students (both completers and non-completers) annually adds some $131.3 million in income to the Lower Shore.

Altogether, the average annual added income due to the activities of Wor-Wic and its former students equals $149.1 million. This is approximately equal to 2.7 percent of the total Wor-Wic Service Area economy.

Wor-Wic affects the local economy in three ways:

–Its local purchases, including wages paid to faculty and staff.

–The spending of students who come from outside the region.

–Through the increase in the skill base of the local workforce.

Wor-Wic creates income through the earnings of its faculty and staff, as well as through its own operating and capital expenditures.

Adjusting for taxes and other monies withdrawn from the local economy in support of Wor-Wic, it is estimated that the Wor-Wic Service Area economy receives a net of $17.3 million in added labor and nonlabor income due to Wor-Wic operations each year.

Students from outside the region spend money for room and board, transportation, entertainment, and other miscellaneous personal expenses.

The spending of Wor-Wic’s non-local students generates approximately $485,900 in added income in the Wor-Wic Service Area economy each year.

College operations effect

Nearly all employees of Wor-Wic (82 percent) live in the Wor-Wic Service Area. Faculty and staff earnings become part of the region’s overall income, while their spending for groceries, apparel, and other household expenditures helps support local businesses.

In addition to being an employer, Wor-Wic is also a purchaser of supplies and services. Many of Wor-Wic’s vendors are located in the Wor-Wic Service Area, creating a ripple effect that generates additional jobs and income throughout the economy.

The impact of Wor-Wic operations is subdivided into the following two main effects: the direct effect and the indirect effect. The direct effect, equal to $17.4 million, comprises the college’s payroll and employee benefits.

The indirect effect refers to the additional income created in the economy as Wor-Wic employees and the college’s vendors and contractors spend money in the region to purchase even more supplies and services.

Wor-Wic received an estimated 32 percent of its funding from sources in the Wor-Wic Service Area. This funding may have come from students living in the region, local sales and services, or from local government. A portion of the state funding received by Wor-Wic also originated from local taxpayers.

Devoting local funds to Wor-Wic means that they are not available for other uses, such as consumer spending on the part of students or public projects on the part of government. Monies that are injected into the economy on the one hand are thus withdrawn on the other. Because of this, a portion of Wor-Wic’s impact on the economy cannot be considered as new monies brought to the region.

To determine the “net” impact of Wor-Wic operations, the report’s authors take the estimated portion of Wor-Wic funding that originated from local sources and convert it to spending. They then bridge the spending figures in an economic model and calculate the multiplier effect, which is convert to income. The result, $3.4 million, allows reviewers to see what impacts would have occurred in the Wor-Wic Service Area anyway, even if Wor-Wic did not exist.

This value is subtracted from the gross effect of Wor-Wic to arrive at the true or “net” impact of college operations in the 2011-12 reporting year—a total of $17.3 million.

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