Econonimst: WCPSS Provides Significant Economic Impact

Editor’s Note: Dr. Michael Walden will present his findings to the Wake County Board of Education during its regular meeting on Nov. 10, 2020. It can be viewed on the WCPSS YouTube Channel. Read the full report and view additional resources here.

Public school finance studies usually focus on how and where the money is spent, and analyses of public school effectiveness usually rely on test scores. Few, if any, ever examine what that spending produces in terms of economic growth. A new report titled, “The Economic Impact the Wake County Public School System” released by WakeEd Partnership and Wake County Public School System, in collaboration with NC State University, assesses the value-add of the state’s largest school district to its region, and the results are good for taxpayers and WCPSS graduates alike. Authored by Michael Walden, Ph.D., the William Neal Reynolds Distinguished Professor and Extension Economist at NC State, the report finds that money spent on WCPSS operations and capital expenses yields returns on investment which have significant impact on the economic health of the region. Known for his annual forecast “The North Carolina Economic Outlook” and his bi-weekly newspaper column “You Decide”, Dr. Walden is renowned as an expert in local economic conditions.
Dr. Walden’s findings show that WCPSS spending is a major factor in job creation and additional spending by local businesses. The report also finds that WCPSS graduates earn more over their working lives, have reduced need for other publicly funded resources such as healthcare and criminal justice, and school quality contributes to higher overall property values. The report breaks out the differences in spending between operations and capital spending. Operations are the daily expenses such as salaries, utilities, supplies, fuel, professional services, and general maintenance. Capital spending is generally for construction, renovation, and technology devices. As the report states, “WCPSS spending sets off a chain reaction of other spending and re-spending in the county economy as businesses and households alike take funds received from WCPSS and purchase products and services from vendors in the area.” For example, every $1 spent on operations yields $1.71 in local spending. On the capital side of WCPSS spending, every $1 spent yields $1.63 in local spending. That means for every dollar spent from operating or capital expenses by the school system, it generates more spending by other individuals and entities within the economy. Those additional spending amounts are used on salaries and further purchases by local businesses because of a combination of direct spending by the school system and individual spending by its employees.
Dr. Walden breaks this down to three categories: direct spending (by WCPSS), indirect spending (by WCPSS employees from their salaries and businesses receiving WCPSS direct spending), and induced spending (additional spending caused by a combination of direct and indirect spending). These are commonplace measures in economic analysis. When it comes to job creation, the report notes that for every one WCPSS job, there’s .32 additional jobs created in the region. WCPSS directly employs 18,457 people, so its spending indirectly creates 1,127 jobs, and 4,703 induced jobs, for a combined 5,830 jobs created. That’s equivalent to the county’s 12th largest employer falling between UNC REX Health System and SAS Institute, Inc. In addition to having a multiplier effect on jobs and spending, WCPSS also adds to the real earnings of graduates compared to those who drop out. A WCPSS graduate will earn $7,170 more per year than a drop out, according to the report. As the report demonstrates, not only do WCPSS graduates earn more over their working lives than dropouts do, but graduates are also more likely to obtain a credential, licensure, or earn a two- our four-year degree. In short, those who graduate and earn more will return a portion of their cost of education.
Similarly, they will save their fellow taxpayers a great deal of money. WCPSS graduates are less likely to be involved in crime, saving $2,049 annually per student. They are also less likely to need income-based public health services like Medicaid, saving $17,916 over each graduate’s lifetime. On top of the tax savings noted above, there’s a positive correlation between WCPSS graduates and higher property values, and people are willing to pay more for property to have access to WCPSS schools. The annual impact on tax revenues, as a result, is nearly $1 million more in revenue and $100 million in property values per graduating class between 2015 and 2019. Additionally, the improving academic performance of those classes combined also added a $103.8 million in tax revenue and $11.8 billion to local property values. All these numbers add up to the conclusion that spending on public schools in Wake County is not just another cost to taxpayers. A robust, well-funded school system will, in turn, infuse the local economy with high quality employees as well as additional support for local businesses, job creation, and property owners.
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