The Economic Impact of Texas Community Colleges RECENT COMPTROLLER STUDY OUTLINES BENEFITS

By Patrick Graves with Jessica Donald, Shannon Halbrook and Spencer Grubbs July 2020

Public community colleges play an important dual role in the Texas economy by preparing students for further academic study and providing valuable workforce training. These two-year schools have become the first educational option not just for technical and vocational career-seekers but for many students pursuing baccalaureate degrees.

A recent study conducted by the Comptroller’s office highlights the economic contributions of Texas’ community colleges. In fiscal 2018, community colleges reported revenues totaling more than $5.3 billion, generating an additional $4.5 billion in economic activity by businesses and households, for a total impact of more than $9.8 billion annually. This spending supports almost 78,000 Texas jobs.

It’s an impact that will take on added significance as the state copes with the unprecedented disruptions of the coronavirus pandemic.

Study Findings

In early 2020, the Comptroller’s office requested financial data from Texas’ 50 community college districts to determine their statewide and regional economic impact. The analyses predated the COVID-19 crisis and its adverse economic effects. Under normal economic conditions, however, every dollar spent by community colleges produces an additional 86 cents’ worth of economic activity. Every dollar community colleges spend on compensation produces an additional 38 cents in total income to the state economy (Exhibit 1).

Exhibit 1: Estimated Economic Impact of Texas' Community Colleges, 2019

	Effects
Economic Indicator	Direct	Indirect	Induced	Total Effect	Multiplier
Employment Number of jobs	57,437	7,355	12,946	77,738	1.35
Output	$5.3 billion	$2.03 billion	$2.63 billion	$9.83 billion	1.86
Compensation	$3.43 billion	$491 million	$796 million	$4.7 billion	1.38

Note: Output refers to the intermediate and final economic values of goods and services. Induced effects are the jobs, sales/output and compensation created when new employees spend their wages at local business establishments. Multipliers indicate additional economic activity generated by one dollar of spending.
Sources: JobsEQ, Texas Higher Education Coordinating Board and Texas Comptroller survey of Texas community colleges

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The economic contribution of community colleges has been noted nationally as well. In a 2014 study performed in collaboration with the American Association of Community Colleges, the economic modeling firm Emsi estimated that (PDF) two-year institutions of higher education (IHEs) added $809 billion to the U.S. economy in 2012, primarily due to the economic contributions of former students. It’s an amount equivalent to about 5.4 percent of the nation’s gross domestic product.

The Emsi study also found that U.S. community college students could expect to earn an additional $4.80 for every dollar spent on tuition during their work lives. The company estimated a public benefit of $6.80 for every taxpayer dollar invested in community colleges. Emsi also put the present value of the added income generated by community college graduates at more than $1.1 trillion.

Good Returns

A community college education delivers good returns on students’ commitments of time and tuition. In 2019, Texas workers with associate degrees or some college credit and stable jobs (those employed by the same firm throughout a calendar quarter) earned an average $8,393 more annually than high school graduates. For those 3.2 million workers, the wage increase alone means an additional $27.2 billion a year in direct compensation circulating in the state economy — more than five times the total spending of the state’s community colleges (Exhibit 2).

This wage boost is notable given the modest two-year time commitment typically required for an associate degree, as well as its relatively low cost. In-state annual tuition and fees at Texas community colleges averaged $2,209 in 2017-18, fourth lowest among states (behind California, New Mexico and Arizona) and roughly two-thirds the national average of $3,243, according to the National Center for Education Statistics.

“Community colleges are a great value, any way you look at it,” says Texas Comptroller Glenn Hegar, who began his own higher education at a community college. “They’re a low-cost way for students to experience higher education, usually in a setting close to home. That’s a winning combination.”

Consequently, community colleges attract more students than any other type of IHE in Texas. According to the Texas Association of Community Colleges (TACC) (PDF), in fall 2017 community colleges accounted for 46 percent of the state’s higher education enrollment. In fall 2019, 748,399 students were taking courses at the state’s public community college campuses.

Exhibit 2: Texas Earnings by Educational Attainment, 2019

Sources: U.S. Census Bureau and JobsEQ

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Access to Higher Ed

Texas currently ranks 36th in the nation in educational attainment, with slightly less than 39 percent of the adult population holding an associate degree or higher. In 2018, just 43.5 percent of 25- to 34-year-old Texans held a degree or certificate. Raising that share to at least 60 percent by 2030 is among four goals set by the Texas Higher Education Coordinating Board (THECB) to ensure the state remains competitive in the global marketplace. Community colleges will play a vital role in meeting this goal.

Originally called junior colleges, two-year IHEs were created to expand access to higher education. TACC reports that more than half of all Texas undergraduates attend community college at some point, and that 34 percent of four-year college students graduating in 2017 had transferred at least 30 of their credit hours from a community college.

In the 2017-18 school year, liberal arts and sciences, general studies and humanities degrees and certificates made up nearly 40 percent of all credentials awarded by Texas community colleges (Exhibit 3).

In recognition of the growing importance of two-year IHEs, the Texas Legislature has allowed some to offer certain bachelor’s degrees and has increased grants and other types of financial aid for their students.

Exhibit 3: Community College Certificates and Degrees Awarded by Type,
2017-18 Academic Year

Source: JobsEQ

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Workforce Needs

A 2012 study by the international Organization of Economic Cooperation and Development, noted in THECB’s strategic plan (PDF) for 2015 through 2030, identified Texas as one of several states with significant worker skills deficits that hampered companies’ ability to fill jobs. These shortages have persisted in certain fields and industries. During the 2017-18 academic year, the number of degrees and certificates awarded by Texas IHEs fell well short of market demand. The health professions, for example, had nearly 20,000 fewer Texas workers with two-year degrees and certificates than needed (Exhibit 4).

Community colleges help close these gaps by responding to changes in the economy and job markets. They focus on job training and the employment needs of businesses in their areas, awarding certificates and associate degrees that can lead directly to employment in high-demand fields ranging from welding to health care. They often collaborate with regional employers to identify market trends and fill specific niches in their communities’ workforces.

And these trained workers tend to stay in the area, increasing the local benefits. A 2018 Emsi study found that, on average, community college graduates stay within 300 miles of their colleges and 61 percent live within 50 miles.

Exhibit 4: Largest Degree and Certificate Shortages in Texas by Industry,
2017-18 Academic Year

Source: JobsEQ

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Dual Credit

Dual credit courses, by which high school students earn credit toward both graduation and college degrees, are a common feature at Texas community colleges. Dual credit enrollment rose by 34 percent from fall 2008 to fall 2018; dual credit courses comprised almost a fourth of all two-year IHE enrollment in fall 2018, according to THECB.

College Readiness

Community colleges often help students become prepared for college-level work. According to a July 2019 THECB report (PDF), nearly 58 percent of students entering public community and technical colleges are underprepared for freshman-level coursework, compared to 16 percent of those entering public universities. Rather than enrolling them in non-credit developmental education courses that often prove counterproductive, THECB is promoting a two-pronged approach: support and intervention courses coupled with for-credit courses in the same subject matter.

Since 2017, most Texas IHEs have implemented this “co-requisite remediation” for at least 25 percent of their developmental education students. THECB has awarded $2.74 million to 18 community colleges and universities to support the development and implementation of co-requisite models. Officials say student outcomes are improving and should continue to do so with full implementation.

Community Colleges in the Recession

In response to the current recession, the Texas Workforce Commission (TWC) has created a $10 million program within its Skills Development Fund to train displaced workers and new and existing employees of businesses affected by COVID-19 through community colleges and workforce development boards. As of mid-July 2020, TWC had approved more than $9.9 million in grant funding to 50 applicants, 40 of them public community and technical colleges. More than 5,300 trainees are anticipated for industries including manufacturing, health care and hospitality, and in fields as diverse as cybersecurity and phelebotomy. Training through the program began on June 1.

TACC officials expect dual credit enrollment increases to continue this fall. Dual credit courses often are offered free or at a discount, but college officials say revenue declines and higher delivery costs could hinder their availability.

TACC anticipates further community college enrollment increases, either this fall — depending on the level of concern over COVID-19 — or next year. Either way, community colleges are well-positioned to support those seeking to upskill or reskill as Texas restarts its economy. FN

For more information on the economic impact of the state’s community colleges, view our report.

The COVID-19 pandemic is having a profound impact on Texas community colleges. Learn how these institutions are responding to the crisis in our exclusive Q&A with Deputy Higher Education Commissioner Ray Martinez III at FiscalNotes.org.