CENTERFORBENEFIT‐COSTSTUDIESINEDUCATION,
TEACHERSCOLLEGE,COLUMBIAUNIVERSITY
BENEFIT‐COSTANALYSISOF
ACCELERATEDSTUDYIN
ASSOCIATEPROGRAMS(ASAP)
OFTHECITYUNIVERSITYOF
NEWYORK(CUNY)
HenryM.LevinandEmmaGarcia
May2013
ii
ACKNOWLEDGMENTS
The authors wish to extend thanks to the following individuals for their assistance in the
development of the study and preparation of this report: Brooks Bowden, Research Associate at
the Center for Benefit-Cost Studies of Education (CBCSE); Donna Linderman, CUNY Associate
Dean for Student Success Initiatives and ASAP University Executive Director; Colin Chellman,
CUNY Associate Dean for Institutional Research; Zineta Kolenovic, CUNY ASAP Assistant
Director for Evaluation and Research; and Simon McDonnell, CUNY Senior Policy Analyst.
Special thanks to the New York City Center for Economic Opportunity (CEO) for their support
of this study.
iii
ABOUTTHECENTERFORBENEFIT‐COSTSTUDIESOF
EDUCATION(CBCSE),
TEACHERSCOLLEGE,COLUMBIAUNIVERSITY
The Center for Benefit-Cost Studies of Education (CBCSE) conducts research on the benefits
and costs of alternative educational policies and interventions.
Education is a social investment that entails both costs and outcomes.
Too often assessments of educational alternatives either ignore their costs or calculate them in
inappropriate ways. Similarly, benefits of education are often viewed too narrowly or measured
inappropriately.
The CBCSE brings together scholarship on both benefits and costs so that the full value of
investments in education can be evaluated, and the most productive use of resources can be
chosen.
The Center also undertakes cost-effectiveness studies to ascertain the types of educational
interventions that will produce educational outcomes at least cost.
For more information visit: http//www.cbcse.org/.
1
ABSTRACT
This study evaluates CUNY’s Accelerated Study in Associate Programs (ASAP) from a
benefit-cost perspective. ASAP is designed to accelerate degree completion within three years at
community colleges. This report builds on the CUNY evaluations of ASAP, which provide
consistent evidence for the dramatic success of ASAP on increasing the timely completion of
associate degrees. Although ASAP requires more resources per student than the traditional
associate program, the cost per graduate was found to be lower because of its much higher
effectiveness in producing graduates.
The benefit-cost analysis of ASAP enables us to calculate the monetary costs and benefits
of this intervention with particular emphasis on the financial returns to the taxpayer. We estimate
the benefits arising from higher tax revenues and lower costs of spending on public health,
criminal justice, and public assistance and compare them with the required investment for ASAP.
The estimates show that there are large financial returns on ASAP investment for the taxpayer
and for the students in the program. In all cases, the benefits exceeded the costs. For each dollar
of investment in ASAP by taxpayers, the return was between three and four dollars and around
twelve dollars for each dollar invested by the individuals, suggesting that ASAP is a very
productive public and private investment. When applied to the much higher ability of ASAP to
produce high graduation rates, the overall returns to the taxpayer are impressive. A cohort of
1,000 students enrolled in ASAP would generate fiscal benefits for the taxpayer beyond
investment costs of more than $46 million, a very substantial monetary return for this
educational intervention.
2
LISTOFTABLESANDFIGURES
Table ES1: Lifetime Earnings by Educational Attainment. Breakdown by Gender, and Ethnicity
(Present Value at Age 23 at 3.5 Percent Discount Rate), 2008-10
Table ES2: Generation of Total Fiscal Benefits to the Taxpayer per Degree (Present Value of
Lifetime Benefits at Age 23)
Table ES3: Benefits to Cost Comparisons for the Taxpayer: Total Institutional Costs versus Direct
Benefits
Table ES4: Net Present Value of the Taxpayer Investment for 1,000 ASAP Enrollees versus
1,000
Traditional Students
Table ES5: Net Benefits for the Student: Total Student Costs versus Benefits
Table 1: Total Institutional Cost per Graduate
Table 2: Employment and Unemployment Rates, and Economically Active Population
(% in the Labor Force)
by Educational Attainment, 2010
Table 3: Lifetime Earnings by Educational Attainment. Breakdown by Gender, and Ethnicity
(Present Value at Age 23 at 3.5 Percent Discount Rate), 2008-10
Table 4: Lifetime Earnings, City, Property and Sales Taxes by Educational Attainment.
Breakdown by Gender and Ethnicity (Present Value at Age 23 at 3.5 Percent Discount
Rate)
Table 5: Lifetime Earnings, City, Property and Sales Taxes: Comparison by Educational
Attainment. Breakdown by Gender and Ethnicity (Present Value at Age 23 at 3.5 Percent
Discount Rate)
Table 6: Health Coverage Indicators by Educational Attainment
Table 7: Health Coverage Indicators by Educational Attainment. Breakdown by Gender and Race
Table 8: Lifetime Public Health Expenditures, by Educational Attainment (Present Value at Age
23 at 3.5 Percent Discount Rate)
Table 9: Welfare Assistance by Educational Attainment
Table 10: Lifetime Welfare Income, by Educational Attainment (Present Value at Age 23 at 3.5
Percent Discount Rate)
Table 11: Proportion of Incarceration and Participation in Other Crime-Related Activities
Table 12: Lifetime Crime Costs, by Educational Attainment (Present Value at Age 23 at 3.5 Percent
Discount Rate)
Table 13: Generation of Total Fiscal Benefits to the Taxpayer per Degree (Present Value of
Lifetime Benefits at Age 23)
Table 14: Benefits to Cost Comparisons for the Taxpayer: Total Institutional Costs versus Direct
Benefits
3
Table 15: Net Present Value of the Taxpayer Investment for 1,000 ASAP Enrollees versus 1,000
Traditional Students
Table 16: Total Costs Per Graduate, Comparison Group and ASAP Group: Breakdown per
Constituent (Student), for Three Years
Table 17: Net Benefits for the Student: Total Student Costs versus Benefits
Table A1: Summary of Sources of Information
Table A2: Tax Revenue Gains for Married People
Table A3: Lifetime Earnings, City, Property and Sales Taxes by Educational Attainment (for
Married People)
Table A4: Lifetime Earnings, City, Property and Sales Taxes by Educational Attainment: Single
Minus Married
Table A5: Approximate Distribution of the Benefits by Government Level
Figure 1: Average Earnings and Years of Schooling, 2008-10
Figure 2: Age-Earnings Profiles by Educational Attainment, 2008-10
Figure 3: Federal, State, and FICA Age-Income Tax Profiles by Educational Attainment, 2008-10
Figure 4: Proportion of CUNY’s Associate Graduates Currently Residing in New York State and
New York City by Graduation Year, 1981-2008 (in Percentages)
4
EXECUTIVESUMMARY
In 2009 more than 7.5 million students were attending community colleges in the U.S.
(Bureau of the Census, U.S. Department of Commerce 2012), however, only about 22 percent of
students who enrolled in community colleges completed an associate degree within three years
(Snider & Dillow 2011), and completion rates were even lower in urban institutions. A separate
analysis of a national database by the CUNY Office of Institutional Research and Assessment
(OIRA) has found that only 16 percent of students at urban community colleges graduate within
three years.
In recognition of this challenge, the City University of New York (CUNY) established a
comprehensive program to assist students to complete their associate degrees with support from
the New York City Center for Economic Opportunity (CEO). This program, known as
Accelerated Study in Associate Programs (ASAP), aims to graduate at least “…50 percent of
students within three years through provision of comprehensive support services and financial
resources that remove barriers to full-time study, build student resiliency, and support degree
completion” (Linderman & Kolenovic 2012: 9).
The results have been immediate and impressive; ASAP has more than doubled the
number of associate degrees in three-years compared with the results of a matched group of
similar students who did not benefit from ASAP services. The program has been considerably
more effective at graduating students than conventional community college experiences. But,
given the fact that ASAP requires additional financial resources, two questions arise: 1) Is ASAP
more cost effective than the conventional approach? and 2) Does the investment return greater
benefits to the taxpayer than its costs?
In a previous cost-effectiveness study
1
we asked whether the larger number of graduates
is sufficient to compensate for the additional resource costs (Levin & Garcia, 2012). In that
study, we compared the institutional costs per associate degree completion of students in ASAP
with that of a comparison group of similar students who did not participate in ASAP. This
comparison revealed that the cost per three-year graduate with an associate degree was actually
lower for ASAP than for the comparison group. Although the program costs per student were
greater, the increase in the number of three-year graduates was so substantial that the cost per
completed degree for ASAP students was about $6,500 less than for the comparison group.
The report that follows evaluates the returns on the investment in ASAP by comparing
the value of monetary benefits to taxpayers and students relative to the monetary costs that each
constituency pays. Benefit-cost analysis enables us to ascertain whether an investment in ASAP
is “worth it” in terms of benefits exceeding costs. In the case of improving educational success,
there are obvious benefits to the student in terms of better employment and job opportunities and
improved options for further education, as well as better health, greater knowledge, and the
1
http://www.cuny.edu/academics/programs/notable/asap/about/evaluation/Levin-ASAP-Cost-Effectiveness-
Report.pdf
5
ability to learn new things. There are also benefits to the taxpayers who pay much of the cost of
investment in education. By increasing the numbers and quality of educated persons, society
gains from higher economic productivity and income, as well as greater technological advance
and inventive activity. Government and taxpayers also experience fiscal benefits in higher tax
revenues and lower demand for and costs for spending on public health, criminal justice, and
public assistance (Belfield & Levin 2007a). This report compares the benefits and costs of the
additional associate degrees produced by ASAP to ascertain if the benefits exceed costs and to
estimate the magnitude of those differences. That is, we focus specifically on whether taxpayer
investments in producing additional associate degrees at CUNY community colleges through
ASAP will produce taxpayer benefits that are equivalent or greater. The basic method draws
upon traditional analysis of investment in human capital (Becker 1964), which was first applied
to specific educational policies by Levin (1972) to calculate the benefits of specific educational
interventions relative to their costs.
BenefitsofAssociateDegreeCompletion
We calculate the benefits of completing an associate degree for the student and the
taxpayer by considering the benefits of higher earnings; income tax contributions, property taxes,
sales taxes, local income taxes, and the reduced costs of public services for crime, public health,
and public assistance.
SummaryofStudentBenefits
Table ES1 shows the present value
2
of lifetime earnings for high school and associate
degree recipients by gender and race. The average for the overall group is based upon the overall
composition of the New York City population, on the premise that CUNY community college
enrollments should ultimately be ethnically similar to the city. The advantage in present value of
lifetime earnings for the associate degree over high school completion is substantial, varying
from about $310 thousand to about $362 thousand, depending upon the group. This is a
substantial lifetime premium for an associate degree. Present value in this table can be thought of
as the equivalent of a certificate of deposit (CD) that pays 3.5 percent a year in interest over a
lifetime.
2
For specific details, see detailed information in the report (Levin & Garcia, 2013).
6
Table ES1: Lifetime Earnings by Educational Attainment. Breakdown by Gender, and
Ethnicity (Present Value at Age 23 at 3.5 Percent Discount Rate), 2008-10
HS Associate
Associate minus HS
Total 640,330 964,472 324,142
Male 790,064 1,128,983 338,919
Female 485,903 848,132 362,229
White 792,455 1,128,714 336,260
Black 616,739 926,892 310,153
Hispanic 566,767 869,654 302,887
Other 532,962 857,746 324,784
Source: Authors’ calculations based on American Community Survey (ACS) 2008-2010. Productivity increase per
year: 1.5 percent. In constant 2010 dollars.
SummaryofTaxpayerBenefits
Table ES2 provides a summary of the direct fiscal benefits to the taxpayer for producing
an additional associate degree. Most of the benefits are generated from the additional tax
revenues of associate degree recipients, amounting to a present value at age 23 of about
$165,000 (or 80 percent). However, there are also substantial benefits from reduced costs of
public health, public assistance and criminal justice, amounting to about $40,000 (or 20 percent).
Overall, each additional associate degree provides fiscal benefits to the taxpayer of $205,000 in
present value of lifetime benefits at age 23, the equivalent of giving a gift of a certificate of
deposit to taxpayers of this amount. That is, the achievement of an associate degree by high
school completers provides considerable relief to taxpayers in higher tax revenues and lower
public spending over the lifetime of the associate degree recipient.
Table ES2: Generation of Total Fiscal Benefits to the Taxpayer per Degree (Present Value
of Lifetime Benefits at Age 23)
Per Additional Associate Degree
Total Public Benefits $205,514
Tax revenues from income
a
$145,567
Property and sales taxes $19,833
Savings-health expenditures-public
b
$5,026
Savings-Welfare and public assistance $5,956
Savings-Criminal Justice $29,132
Note: a: Includes Federal, State, FICA, and City Income taxes; b: Includes Medicare, Medicaid, VA, TRICARE,
Other Federal, State, and Local Sources, and Other Public. For specific sources of information, see detailed
information in the report (Levin & Garcia, 2013). In constant 2010 dollars.
7
NetBenefitsofAssociateDegreeCompletion
NetBenefitsofASAPfortheTaxpayer
Although there are considerable benefits to the taxpayer from this investment, it is
important to deduct the investment cost to produce an associate degree. There are two ways to
express this comparison. The first is to subtract the cost of the taxpayer investment for
increasing the number of associate degree holders from the taxpayer benefits produced by the
additional associate recipients. Do the benefits exceed the costs, and by how much? A second
way is to establish the ratio of benefits to costs to ascertain the dollar return in benefits for each
dollar of costs. Table ES3 shows the net benefits to the taxpayer after costs are accounted for, as
well as benefit-cost ratios.
Table ES3: Benefits to Cost Comparisons for the Taxpayer: Total Institutional Costs
versus Direct Benefits
Benefits per
Additional Degree
(Taxpayer)
Institutional Cost per
Graduate (Taxpayer)
Benefits Minus
Costs (Net Benefits)
(Taxpayer)
Benefit/Cost
Ratio
(Taxpayer)
Fall 2006
Comparison
Group
$205,514
$65,884
$139,630
3.1
Fall 2007
ASAP Cohort
$205,514
$59,302
$146,212
3.5
In constant 2010 dollars.
The impressive return to the public investment for each graduate, does not take account
of the massive increase in graduate completion of ASAP. ASAP has a three-year graduation rate
of almost 55 percent, in contrast to only about 24 percent for the traditional program. If 1,000
students enter the traditional program, about 241 would be expected to graduate in three years. If
1,000 students enter the ASAP program, we would expect more than twice as many, about 549,
to graduate. As shown in table ES4, the total net benefits associated with the initial enrollment
of 1,000 students in ASAP are about $46,000,000 higher than the net benefits associated with a
similar initial enrollment for the comparison group.
8
Table ES4: Net Present Value of the Taxpayer Investment for 1,000 ASAP Enrollees versus
1,000 Traditional Students
Enrollees
Graduates per
1,000 Enrollees
Net Benefits per
Graduate
Total Net
Benefits per
1,000 Enrollees
Comparison Group
1,000 241.2 $139,630 $33,678,756
ASAP Cohort
1,000 548.6 $146,212 $80,211,903
Difference (ASAP-Comparison)
$6,582 $46,533,147
In constant 2010 dollars.
Total net benefit associated with actual current 2012/13 CUNY ASAP enrollment (2,200
students), is estimated to be $102,000,000 over and above a similar comparison group
enrollment. This is a sizable advantage in the impact in favor of ASAP, as well as providing
considerably higher efficiency in assisting community college students to complete their studies,
a winning strategy for students, taxpayers, and CUNY.
NetBenefitsofASAPfortheStudents
The total direct benefit to the associate graduate in terms of additional income beyond
that of a high school graduate is shown in table ES5. These incremental income gains are
calculated after the student pays income taxes on gross earnings differences. The income gains
minus costs paid by the student, including lost earnings while studying, are about $138,000 for
each additional graduate in the comparison group, and about $146,000 for each additional
graduate in ASAP. The benefit to cost ratio for the associate recipient is 7.6 for each additional
graduate in the comparison group and 12.2 for each additional ASAP graduate. Another way of
stating the gains to the student beyond the costs paid (including foregone earnings for three
years) is that the income advantage of an associate degree beyond high school completion is the
equivalent of being given a certificate of deposit of about $140,000 net of taxes. This provides a
powerful incentive for students to undertake an associate degree at CUNY.
Table ES5: Net Benefits for the Student: Total Student Costs versus Benefits
After-tax Income
Benefits per
Degree (Student)
Total Cost per
Degree (Student)
Benefits minus
Costs (Net
Benefits)
(Student)
Benefit/Cost
Ratio
(Student)
Fall 2006
Comparison
Group
$158,742
$20,996
$137,746
7.6
Fall 2007
ASAP
Group
$158,742
$13,062
$145,680
12.2
In constant 2010 dollars.
9
AHighlyProductiveInvestment
From the comparison of benefits over a lifetime we can conclude that, for both taxpayer
and students, the benefits far exceed the investment costs. For each dollar of investment in
ASAP by taxpayers, the return was between three and four dollars. For each dollar of investment
by students, the return was much more, even when including student foregone earnings as the
major component of student costs. Using available data on which public constituencies receive
the benefits—federal, New York State, and New York City governments, we believe that all
constituencies receive benefits that exceed their cost contributions to the investment.
From a policy perspective, the full magnitude of the returns to the taxpayer must take
account of the superior effectiveness of ASAP in comparison with the conventional program.
When converted into overall benefits generated by the 1,000 enrollees, the considerably higher
productivity of ASAP in producing associate degrees would provide fiscal benefits to the
taxpayers of $46 million dollars beyond those of investing an approximately equal amount in the
conventional degree program.
Not only is ASAP less costly per additional graduate and twice as effective in the
production of associate degrees, but from the perspective of both taxpayer and student, the
benefits generated by ASAP represent a very productive public investment with a high monetary
return. Needless to say, this powerful public investment is buttressed further by the other
substantial educational contributions and success that cannot be assessed in monetary terms.
10
INTRODUCTION
In 2009 more than 7.5 million students were attending community colleges in the U.S.
(Bureau of the Census, U.S. Department of Commerce 2012). These institutions provide
opportunities for entry into higher education because of their geographic accessibility,
adaptability to student and employer educational needs, transfer route to four-year institutions,
and flexibility in scheduling and composition of courses. The reality, however, is that relatively
few students complete the 60-credit course of study to obtain the associate degree. According to
the U.S. Department of Education, only about 22 percent of students who enroll in community
colleges complete an associate degree three years later (Snider & Dillow 2011) and completion
rates are even lower in urban institutions.
3
In recognition of this challenge, the City University of New York (CUNY) established a
comprehensive program to assist students to complete their associate degrees with support from
the New York City Center for Economic Opportunity (CEO). This program became known as
Accelerated Study in Associate Programs (ASAP) and is designed to increase dramatically the
number of students who complete an associate degree in a timely manner (Linderman &
Kolenovic 2012).
The goal of ASAP is to graduate at least “…50 percent of students within three years
through provision of comprehensive support services and financial resources that remove
barriers to full-time study, build student resiliency, and support degree completion” (Linderman
& Kolenovic 2012: 9). When ASAP began in 2007, the three-year CUNY community college
graduation rate was 24 percent for fully skills proficient students, based on CUNY analysis of
student-level data from the CUNY Institutional Research Database (IRDB),
4
and 13 percent for
all first-time full-time community college students who entered in fall 2004 regardless of skills
proficiency (CUNY Office of Institutional Research and Assessment, 2012).
ASAP was established at CUNY’s six community colleges:
5
Borough of Manhattan
Community College (BMCC), Bronx, Hostos, Kingsborough, LaGuardia, and Queensborough,
and uses a common and comprehensive design to overcome the obstacles to timely degree
completion. To counter these obstacles, the program enlists a variety of interconnected supports
(Linderman & Kolenovic 2012:10-11).
1. Financial Incentives: Any gap between a student’s financial aid award and tuition and
fees is waived, and all students receive free monthly transit Metrocards and free use of
textbooks.
3
CUNY Office of Institutional Research and Assessment (OIRA) analysis of data from
Integrated Postsecondary Education Data System (IPEDS) reveals that nationally only 16 percent of urban
community college students graduate within three years.
4
The CUNY IRDB is the official source for all CUNY student-level data and is maintained by the Office of
Institutional Research and Assessment (OIRA).
5
CUNY opened a seventh community college, the New Community College (NCC) in fall 2012. NCC incorporates
many elements of ASAP into its design.
11
2. Consolidated Full-time Schedule: Classes are clustered into a consolidated schedule
(either morning or afternoon) to help balance school, work, and domestic responsibilities,
and students are required to take at least 12 units each semester.
3. Cohort Design and Faculty Support: Students are grouped in cohorts with ASAP students
by major; in their first year, they take several “blocked” classes with fellow ASAP
students that are capped at 25 students.
4. Regular Advisement: ASAP students meet with advisors monthly for provision of
academic, social, and interpersonal support. Students also participate in a weekly seminar
for two semesters.
5. Career Preparation: ASAP career and employment specialists meet with students for
career assessment, discussion of job skill requirements, career planning, and interview
preparation. They also support students with any immediate job placement needs.
6. Extra Academic Assistance: Tutoring is provided for struggling students. These services
are mandatory for students with outstanding developmental needs, those who have
experienced course failure, or those identified as struggling by faculty members through
referral to ASAP advisors.
Careful assessment of ASAP has provided evidence of its early promise with over half of
its initial cohort of 1,132 students who started community college in the fall of 2007 having
earned an associate degree three years later, in comparison with only about a quarter of a
matched comparison group of students who did not benefit from inclusion in ASAP (Linderman
& Kolenovic 2012). The second ASAP cohort admitted in 2009 also realized a three-year
graduation rate of 55 percent vs. 23 percent for a comparison group of similar students
(Linderman, 2012). These evaluations were accomplished by matching ASAP students with a
statistically similar group in terms of demographic characteristics, academic major, and
educational preparedness. Other evaluations are also underway using different methodologies—
for example, an experimental study using random assignment to ASAP, being led by MDRC.
6
ASAP has been shown to more than double the number of graduates in a three-year
comparison with similar students who did not benefit from ASAP services. Although the
program is more effective than the conventional community college pathways, the question
arises as to whether it is more cost effective. Implementing ASAP requires additional costs to
provide the extra services outlined above. In a previous cost-effectiveness study, we asked
whether the larger number of graduates compensate for the additional resource costs (Levin &
Garcia, 2012).
To undertake the cost-effectiveness analysis, we compared the institutional costs per
associate degree completion of students in ASAP with that of a comparison group of similar
students who did not participate in ASAP. This comparison revealed that the cost per three-year
6
A preliminary report from MDRC on the ASAP random assignment study can be found at:
http://www.mdrc.org/node/13229#featured_content
12
graduate with an associate degree was actually less for ASAP than for the comparison group.
Although the program costs were greater, the increase in the number of three-year graduates was
so substantial that the cost per completed degree for ASAP students was about $6,500 less than
for the comparison group. This difference suggests that not only is ASAP more cost-effective
than the conventional approach, but that CUNY could save about $6.5 million in producing
another 1,000 graduates through ASAP.
ReturnsonInvestment:ABenefit‐CostAnalysis
Cost-effectiveness analyses address the relative costs among alternatives for achieving
particular goals. In the case of increasing the numbers of three-year graduates in the community
colleges of CUNY, this evaluation has shown that ASAP can double the number of graduates in
a three-year period and do it at less cost per graduate than the conventional program without
ASAP. Cost-effectiveness comparisons enable us to choose the most efficient approaches for
achieving objectives, but they do not evaluate the returns to investing in a program like ASAP.
They provide information that enables us to choose those approaches that accomplish a particular
goal with the least resources.
In contrast, benefit-cost analyses enable us to ascertain whether a particular alternative is
“worth it” by comparing the costs in monetary terms with the value of the benefits in monetary
terms. In the case of improving educational success, there are obvious benefits to the student in
terms of better employment and job opportunities and improved options for further education, as
well as better health, greater knowledge, and the ability to learn new things. But there are also
benefits to the taxpayers who pay much of the cost of investment in education. By increasing the
numbers and quality of educated persons in society, the society gains from higher economic
productivity and income, as well as greater technological advance and inventive activity. It also
experiences fiscal benefits in higher tax revenues and lower demand for and costs for spending
on public health, criminal justice, and public assistance (Belfield & Levin, 2007a).
This report compares the benefits and costs of additional associate degrees produced by
ASAP to ascertain if the benefits exceed the costs and the magnitude of the differences.
Although some reference will be made to the individual costs and benefits, the focus will be
primarily on the fiscal costs and benefits to the taxpayer. That is, we will address whether
taxpayer investments in producing additional associate degrees at CUNY community colleges
through ASAP will produce taxpayer benefits that are equivalent or greater.
The basic method for making such benefit-cost calculations has been used in education
since the early sixties when economists refined the method of analysis for investment in human
capital (Becker 1964). Economists found that investments in education showed rates of return
that were comparable or greater than those found for investments in physical capital-- that is,
productive facilities and equipment, the traditional focus of investment. Although this literature
referred largely to the “profitability” of individuals investing in further education, it extended to
societal investments and the investment benefits to society of more education.
13
The first attempt to apply these methods to a benefit-cost analysis of taxpayer investment
was conducted in 1972 with an analysis of the costs and benefits of reducing high school
dropouts (Levin 1972). This study compared the costs of reducing dropouts with the benefits of
increased income and tax revenues as well as reduced costs of public assistance, crime, and
public health. The limited informational resources and statistical methods available forty years
ago restricted the comprehensiveness and precision of benefit-cost estimates, but even with
conservative assumptions it appeared that the benefits to the taxpayer of reducing high school
dropouts exceeded the costs by at least two to one.
A more refined analysis was applied to an experimental study of a specific investment in
early childhood education. Children at ages three and four from poor families were randomly
assigned to an experimental group that received a quality, pre-school program or a control group
that did not. At age 19 it was found that the pre-school recipients had greater educational
success, lower crime rates, and greater employment prospects than the comparison group that
had not been enrolled in the pre-school. A calculation of benefits to the taxpayer showed that for
every dollar of investment cost, the benefits exceeded six dollars (Barnett 1985). The follow-up
studies of the two groups at ages 27 and 40 confirmed even higher benefits (Belfield, Nores,
Barnett & Schweinhart 2005).
Dramatic improvements in data sources and social science modeling of benefits have
generated studies of benefits and costs of specific educational programs to reduce high school
dropouts (Belfield & Levin 2007b). Five studies were selected from experimental and quasi-
experimental evaluations that showed evidence of increasing graduation rates. The public costs
of these programs were compared with the public benefits in terms of higher tax revenues and
reductions in public costs of crime, health, and public assistance. All five programs showed
benefits in excess of costs, with the median program among the five showing that fiscal benefits
would exceed costs by $127,000 for each additional graduate over a lifetime when valued at age
20 (Levin, Belfield, Muennig, & Rouse 2007; Levin & Belfield 2007). Similar studies were
carried out for states with similar results (e.g. Belfield & Levin 2007b).
Methods
The general approach used for measuring the benefits of education is first to identify the
benefit categories and the evidence behind them. Then it is necessary to place values on
benefits. In the case of completion of an associate degree the benefits are associated with greater
adult success of the individual relative to what the individual would have experienced if he or
she had terminated education at the end of high school. What we do know is that individuals
with more education obtain higher earnings and pay greater taxes (Rouse 2007); experience
better health and lower likelihood of drawing on government health services (Muennig 2007);
are less likely to engage in crime and to enter the criminal justice system (Moretti 2007); and are
less likely to require public assistance (Waldfogel, Garfinkel, & Kelly, 2007). All of these better
outcomes provide benefits to society and the taxpayer by increasing public revenues and
14
reducing the costs of public services. It is this increase in public income and reduction in public
costs that constitute many of the public benefits of additional educational attainment.
In the case of ASAP it would be expected that the additional associate degrees would
produce benefits for the ASAP students as well as for the taxpayer. That is, more associate
degrees translate into greater employment and higher income and tax revenues as well as lower
costs for public health, crime, and public assistance. The value of these public benefits can be
compared with the public costs to ascertain the return on taxpayer investment in ASAP.
ModelingRelationships
Of course, in each of these domains we want to estimate benefits independently of other
possible influences that might be associated with more educated individuals. For example, it is
well known that persons who undertake more education have family advantages and may have
greater educational ability as well. This means that at least some of the additional income and
other benefits of education might be due to associated advantages of the more educated, but are
not uniquely education-induced. Economists have long been concerned with this potential
upward bias in estimating the benefits of education, and have tested a range of methods to try to
separate out the unique effects of education on adult benefits.
These methods have included statistical adjustments for family socioeconomic status and
for an individual’s test performance as well as the use of more sophisticated analytical models.
The latter (see Rouse, 2007) include studies of identical twins with different amounts of
education (but the same families and genes); studies of education and earnings of fraternal twins,
siblings, and father-son pairings. They also use natural experiments to isolate the unique effects
of education, where changes in laws impose more education on a group of students such as
arbitrary increases in compulsory education. The findings from all of these methods suggest that
the observed differences in earnings by educational level are not biased upwards because they
are roughly offset by measurement errors in educational attainment that provide a downward bias
(Rouse 2007). As much as possible we have tried to use estimates of effects based upon causal
models from the academic literature rather than accepting mere correlation.
DataandMeasurement
To a very high degree, CUNY’s community college graduates remain in the New York
metropolitan area and in New York City.
7
This creates an advantage to the City in capturing the
benefits from more education, but a challenge for data collection by researchers. State and
national studies on the consequences of additional education have access to considerable data on
these larger entities. Both independent studies and government studies by the Department of
Justice or the Department of Health and Human Services provide systematic information for the
nation that link education to crime and to health respectively. But, systematic studies at local
7
This is discussed in the later section on community college graduates’ mobility (see page 47).
15
levels are rare to non-existent. The exception is that of the relation between education and
income and its yield of government tax revenues for which data are available from the U.S.
Department of Commerce, and, particularly, the Bureau of the Census. In what follows, we will
be drawing upon the best data sources available on each topic to predict the benefits to the
taxpayer of CUNY ASAP’s success in substantially increasing the timely completion of
associate degrees.
PresentValue
Present Values at Age 23
Both benefits and costs will be based upon comparing three-year associate degree
recipients with those of high school completers who have not entered post-secondary education.
8
Data for partial completers of community college degrees are not available. Costs and benefits
will be stated in terms of present values (PV) in 2010, which is the three-year graduation mark
for students in the original ASAP cohort and the cohort that served as the basis of our study. It is
important to explain PV and why it is used. If costs of additional education and its benefits were
derived in a single year, they could be readily compared. But the costs and benefits of
educational investment occur over different periods of time. For example, the three years of
community college investment to obtain an associate degree necessitate a financial obligation
prior to graduation and produce benefits following graduation. Benefits extend from completion
of study over an entire lifetime. If the typical graduate is 23 years old
9
, we are concerned with
the cost of community college during the previous three years to age 23. Subsequently, the
benefits of the additional education will typically be yielded between the ages of 23-65, a period
of more than 40 years. All of the investment is concentrated early and “up-front,” but the benefits
are delayed and distributed over the next four decades after completion of the associate degree.
We use PV because it allows us to account for a stream of benefits and costs in one simple
figure.
The calculation of PV assumes that benefits received at present have more value than
those that are received in the future. The normal way of valuing future benefits is to use a
discount rate, reduce them by a rate of interest, to make them comparable to benefits received at
present. For example, if you wanted to have $10,000 in 40 years in a lump sum, you would need
to invest only about $2,500 today with a discount or interest rate of 3.5 percent. Another way of
stating this is that $2,500 today is worth $10,000, 40 years from now. Present value simply takes
account of the different time patterns of receipt and disbursement and puts them in comparable
8
We have made all comparisons of benefits and costs between high school graduates and associate degree graduates.
We also attempted to undertake analyses comparing partial completers with associate degree recipients.
Unfortunately, the data that exist for those with “some college” encompass a wide range of education from those
who have taken a single course to those who have completed almost an entire bachelor’s degree. Thus, they cannot
be used to represent “partial completers” studying for the associate degree.
9
The average age of a three year graduate would be 23 for ASAP based on a mean starting age of 20 (see Linderman
and Kolenovic 2012 pg. 17).
16
terms so that they can be compared directly. By expressing benefits and costs in present values at
age 23 in 2010, we will be able to use a comparable yardstick that adjusts for the very different
time patterns in which the costs and benefits are incurred or received for an associate degree
relative to high school completion. The present value of the costs can be subtracted from the
present value of the benefits at a specific time to get “net present value,” the net benefits that are
produced by the investment.
LaborMarkets
Since we will be estimating the income and tax revenue gains of associate graduates as
one of the major benefits to degree recipients and the taxpayer, an obvious concern is the impact
of more graduates on the labor market. If we add substantially to the supply of associate
degrees, won’t we reduce the returns to each one? This would certainly be a concern if the
demand for associate degrees held constant while the supply increased significantly through the
success of ASAP. In actuality, the overall trend in U.S. labor markets is in exactly the opposite
direction, where the relative economic value of post-secondary education is rising in comparison
with that of high school graduates. Empirical studies confirm that even with massive increases
in community college graduates, the economic returns have not declined (Marcotte, Bailey,
Borkowski, & Kienzl 2005). The general explanation is that changes in technology and work
organization and the decline of manufacturing have increased the demand for post-secondary
educational skills relative to lower levels of education. If anything, the use of existing data on
earnings differences by education may understate the future benefits to the individual, taxpayer,
and society of additional education.
COSTSOFTHECUNYASSOCIATEDEGREE
As a first task, we establish the costs of producing a CUNY associate degree for both the
comparison students representing the regular program and for the ASAP students to contrast
costs with the later presentation of benefits that the degree produces for the individual, the
taxpayer, and society. There are several ways that costs can be presented. As noted earlier, we
could list the cost for each year incurred and the benefits for each year received, but this
approach would compare amounts over very different time patterns which are not comparable.
As described above, the standard approach is to state both costs and benefits as “present” values
(PV) at a particular age or time, which enables a comparison that adjusts for the amount and time
distribution of each. We will use age 23 as a typical age of completion of degree and estimate
both the present value of the costs at that age and the value of benefits received when discounted
to age 23.
Levin and Garcia (2012) estimated the costs of producing additional associate degrees
within a three-year period for both the regular programs of CUNY and with the added support
from ASAP. Although ASAP adds additional costs, it also increases the number of degree
completions. The basic method of establishing costs was to first calculate for the ASAP group
17
the costs of their aggregate, full-time equivalent (FTE) enrollments over three years.
10
This was
compared with the overall costs of full-time equivalent students (FTE) of the comparison group
that had not received ASAP services. These costs were then divided by the respective numbers
of associate degrees produced in each group over the three-year period to determine a cost per
graduate. Even with the additional spending for ASAP services, the cost per graduate was less
than for the comparison group because of the much higher yield of graduates, about 55 percent
for ASAP and 25 percent for the comparison group.
Table 1 shows the total institutional cost per graduate expressed as present value (PV) in
2010 at age 23.
11
Although the cost per ASAP student is higher than for the traditional student
because of the extra services, the institutional cost for each graduate is less for students in ASAP
because of the considerably higher graduation rates for ASAP. How institutional costs are
financed will be addressed in later sections, as well as student costs.
Table 1: Total Institutional Cost per Graduate
Total Fall 2006
Comparison Group
Total Fall 2007
ASAP Group
Total Institutional Cost per Graduate
$65,884
$59,302
Notes: The total institutional cost per graduate is the capitalized average cost per graduate at age 23, in 2010 dollars
(see Table 5, Levin & Garcia, 2012).
The overall institutional cost incurred by CUNY for each associate degree (expressed in
terms of present value at age 23) is about $59,000 for the ASAP students and almost $66,000 for
the comparison group. These amounts are slightly more than the totals in Levin and Garcia
(2012) because an interest rate is used to calculate their present value to age 23, assuming that
the typical graduate starts at about age 20 and finishes at age 23. These institutional costs do
include some student costs in terms of tuition and fees. Students also may forego earnings during
the period of study and pay for materials and other costs related to their education. We will focus
the following section of analysis primarily on the cost and returns of the ASAP investment for
the taxpayer. Essentially we will be comparing the institutional costs of conventional and ASAP
students with the benefits generated for taxpayers. This is a conservative approach to the
benefit-cost ratio since not all of the institutional costs are paid by the taxpayer, but a small
portion is paid by the student. Thus, by assuming that all of the institutional costs are paid by the
taxpayer, we will be understating the benefit-cost ratio because we will be assuming higher costs
than the taxpayer actually pays.
10
Full-time equivalent students (FTE) are a commonly used measure for enrollments because instead of just
counting students, they adjust for the number of credits of study undertaken by students so that part-time students
are not given the same enrollment weights as full-time students.
11
The present value represents the cumulative cost expressed in 2010 prices over the three years, presented as the
present value of the investment at age 23. Present value cumulates the investment at an interest rate of 3.5 percent to
get an overall value which can ultimately be compared with the discounted value of the benefits generated when the
costs of the investment and the benefits are compared at age 23.
18
BENEFITSOFASAP
It is important to note that although the costs differ between the two programs for
producing an associate degree, the average benefits for a CUNY associate degree are assumed to
be similar for the two groups since they have relatively similar educational requirements. The
major difference educationally is that a far higher proportion of the non-ASAP students who start
their programs reduce their participation sharply or drop-out, resulting in lower completion rates
for the associate degree (also lower transfer to baccalaureate institutions (Linderman &
Kolenovic 2012)). We will limit this analysis to the benefits of higher associate degree
completion because we lack information on the eventual educational attainments of transfers.
From a cost perspective, the big advantage of ASAP is that even with added program
costs per student, the cost per graduate is lower than the conventional program because the yield
in terms of graduates is doubled. Thus, when we calculate the benefits of the associate degree to
compare with the costs, we will assume that both ASAP and non-ASAP graduates generate the
same benefits per degree, but the costs will be slightly different. We will also show that the
higher yield of ASAP means that the aggregate benefits for any initial group of ASAP enrollees
will exceed considerably the aggregate benefits for a similar number of enrollees who are not
recipients of ASAP services.
As we noted earlier, there are many benefits of higher education that are identified in the
literature, but not all can be measured and given monetary values. McMahon (2009) has
provided one of the most comprehensive presentations and discussion of these benefits, but only
a portion of these defy monetary quantification. The incomplete assessment of benefits gives a
conservative estimate of the payoffs to the investment in ASAP because it includes only those
that can be assessed monetarily, while costs are more readily defined and measured. Specific
benefits of increased associate degree attainment that can be assessed sufficiently to determine
their monetary values include:
1. The additional income reflecting higher productivity and trainability of an associate
degree completer relative to a high school graduate, reflecting benefits to the student and
to society.
2. The higher tax revenues derived from the additional income, reflecting fiscal benefits to
the taxpayer.
3. The reduced costs of public services for crime, public health, and public assistance,
reflecting fiscal benefits to the taxpayer.
4. Overall gains in productivity of other workers created by the presence of a more educated
workforce.
In the following section we will focus on estimating the return on investment to the
taxpayer in terms of higher taxes generated by the increase in associate degrees and the reduction
in cost of public services associated with the additional education. These are the fiscal returns to
19
taxpayer investment through investment in ASAP. In the final section we will consider other
benefits to both individuals and society.
Education,Income,andTaxRevenues
One of the most powerful and consistent findings in the economics of education is the
measurable impact of additional education in producing additional economic opportunity for
both the individual worker and society. Workers with more education are valued more highly in
the workplace because they tend to be more proficient at jobs, benefit more from additional
training, and make better and more productive decisions in the allocation of resources, including
the use of their own time. Out of their higher income they pay greater taxes, which represent the
source of the public share of investment in their education.
In this section we compare the income and tax contributions of individuals with an
associate degree such as those who graduate within three years from ASAP with those who
obtained high school completion or its equivalent.
12
We calculate the benefits for the individuals
and the taxpayer along the following dimensions: earnings; income tax contributions, property
taxes, sales taxes, and local income taxes. In the next section we will provide estimates of the
reductions in public health expenditures, welfare support and public assistance, and criminal
justice associated with associate degree completion. The procedure to compute the PV of the
modeled relationships between educational attainment and these outcomes is explained in the
earlier section on “Present Value.”
IncomeGains
The relationship between education and earnings has been largely documented in the
empirical research (Angrist & Krueger, 1991 and 1999; Griliches, 1979; Ashenfelter & Rouse,
1998; Card, 1999; and Rouse, 2007). On average, individuals with higher educational levels have
higher earnings. They are also more likely to be employed. Figure 1 and Table 2 show these
associations between education and labor market outcomes for both males and females.
Figure 1 shows the average earnings
13
by years of schooling and gender for individuals in
New York City, demonstrating the familiar finding that more years of education are associated
12
Educational attainment is defined, according to the American Community Survey (ACS) and Census information
as:
i) High school graduate or GED; Regular high school diploma; GED or alternative credential (the
acronym “HS” is used in tables and figures hereafter).
ii) Associate degree –type not specified, occupational program, academic program.
The classification is slightly different under MEPS-2008, utilized for the estimates of the health expenditures
savings. A few data sources show income for those with “some college”. Unfortunately the “some college” category
is highly ambiguous and includes a wide range of educational attainments from a single post-secondary course to
many years of study that did not culminate in a degree (the acronym “AA” is used in some figures hereafter).
13
We will refer to earnings and income interchangeably. They are not identical. Earnings are derived from wages
and salaries; income includes not only wages and salary, but also rents, dividends, and interest from property, etc.
However, for high school and associate degree populations, the proportion of income from earnings is usually 95
percent or greater.
20
with higher average earnings. The relationship between education and income is particularly
pronounced between 12 years of schooling and 14 years of schooling, the approximate difference
between high school completers and associate degree recipients. Table 2 shows the labor market
status of individuals by their educational attainment. The rates are shown separately by gender.
At first glance it appears that employment and unemployment rates of high school completers
and associate degree completers are about the same, but this comparison is misleading because it
does not take account of the differences in labor force participation of the two groups. For
associate degree holders in the 23-65 year old population, the associate degree recipients are 10
percentage points more likely to be in the labor force. This means that even with the same
unemployment rates, a much higher proportion of the associate degree holders are employed, a
partial explanation for their higher incomes.
Figure 1: Average Earnings and Years of Schooling, 2008-10
Years of Schooling (HS = 12; Associate= 14)
Note: American Community Survey, 2008-2010, Individuals in New York City, ages 23-65 (population
weighted means). In constant 2010 dollars.
Table 2: Employment and Unemployment Rates, and Economically Active Population
(% in the Labor Force) by Educational Attainment, 2010
Males Females Total
Employ.
Rate
Unemploy.
Rate
Economically
Active Pop
(% in labor
force)
Employ.
Rate
Unemploy.
Rate
Economically
Active Pop
(% in labor
force)
Employ.
Rate
Unemploy.
Rate
Economically
Active Pop
(% in labor
force)
High
School
88.2% 11.8% 80.0%
90.1% 9.9% 62.6%
89.0% 11.0% 71.2%
Associate
Degree
89.3% 10.7% 83.9%
90.1% 9.9% 78.9%
89.7% 10.3% 81.0%
Note: American Community Survey, 2010, Individuals in New York City, ages 23-65 (population weighted means).
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
1234567891011121314171819
Males Females
21
In order to calculate the average earnings differentials between individuals with high
school completion versus an associate degree in New York City, we exploit the American
Community Survey (ACS, hereafter), between 2008 and 2010. We use population weighted
means for the inflation-adjusted wages and salaries of individuals in New York City, between 23
and 65 years old, and assume that productivity grows at a constant rate of 1.5 percent per year
(see Rouse, 2007, page 114). The values are expressed in constant dollars by adjusting all values
to the 2010 price level. Figure 2 shows the age-earnings relationships for the subgroup
populations in New York City. We note that average earnings are higher for individuals with an
associate degree than for those who have limited their education to high school completion. The
earnings-gap widens shortly after age 23, and continues over the years.
Figure 2: Age-Earnings Profiles by Educational Attainment, 2008-10
Source: ACS, 2008-2010
Note: Individuals in New York City, ages 23-65, population weighted means, constant 2010 dollars, all individuals
in the labor force (i.e., individuals with zero and positive earnings, employed, unemployed, out of the labor
force/inactive). Productivity increases yearly by 1.5%.
In order to compare the private income benefits for the student, we wish to compare the
present value of income from age 23 to age 65 for those with the associate degree and those with
a high school diploma or equivalency degree. We assume that productivity growth equals 1.5
percent increase per year. The discount rate is 3.5 percent (Moore, Boardman, Vining, Weimer &
Greenberg, 2004).
$-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65
AA HS
22
Table 3: Lifetime Earnings by Educational Attainment. Breakdown by Gender, and
Ethnicity (Present Value at Age 23 at 3.5 Percent Discount Rate), 2008-10
High School Associate
Associate minus HS
Total
1
640,330 964,472
324,142
Male 790,064 1,128,983
338,919
Female 485,903 848,132
362,229
White 792,455 1,128,714
336,260
Black 616,739 926,892
310,153
Hispanic 566,767 869,654
302,887
Other 532,962 857,746
324,784
Source: Authors’ calculations based on ACS 2008-2010. Productivity increase per year: 1.5 percent. In constant
2010 dollars.
1
Total represents an average of graduates representing the gender and ethnic distribution of New York City.
Table 3 shows the present value of lifetime earnings for high school credential and
associate degree recipients overall as well as by gender and race. The total or average for the
overall group at the top of the table is an average based upon the overall composition of the New
York City population. We assign this outcome to CUNY graduates, on the premise that CUNY
community college enrollments are demographically representative of the population in New
York City. The advantage in present value of lifetime earnings for the associate recipients
varies from about $310 thousand to about $362 thousand, depending upon the group. This is a
substantial lifetime premium for an associate degree. As a reminder, the present value
calculation may be thought of as the value of a certificate of deposit (CD) with a 3.5 percent
interest rate that is given to the student on completion of their associate degree. Since degree
requirements are similar for both ASAP and non-ASAP graduates, we assume that the income
benefits will be similar too.
AdditionalTaxRevenuesfromStateandFederalIncomeTax
The higher income
14
for individuals with an associate degree is an important source of
additional fiscal gains for the taxpayers (Rouse 2007). In order to estimate the expected state and
federal taxes for social security and Medicare (FICA) taxes paid by individuals with earnings, we
use the NBER-Taxsim, version 9.0
15
that was designed for this purpose. To provide information
that is representative of the potential benefits of the CUNY ASAP graduates, who are likely to
remain in the New York Metropolitan area, we use estimates based upon residents of New York
State who are single,
16
only have earnings from income, and have no itemized deductions. We
use the fiscal structure existing in 2010, and the consumer price index (CPI) adjusted to constant
14
Tax contributions are calculated on earnings, as a proxy for an individual’s total income. For the groups studied in
the report, earnings constitute more than 90 percent of income.
15
Available http://users.nber.org/~taxsim/taxsim-calc9
16
Rouse 2007 and Levin, Belfield, Muenning & Rouse (2007) used the same method. As a check, we estimated the
tax contributions from earnings for married people. The results for married people are shown in the Appendix. Total
taxes for married people were, on average, 15% lower than for single people.
23
2010 dollars. The tax base is also adjusted for a productivity increase in earnings of 1.5 percent
per year.
Figure 3 shows the average annual taxes on income by associate or high school
educational attainment. As with the lifetime patterns of income, the lifetime tax contributions
widen until near retirement. It is the difference between these two profiles that represents benefit
recovery to the taxpayer from additional tax revenues for each additional associate degree
recipient relative to the high school graduate.
Figure 3: Federal, State, and FICA Age-Income Tax Profiles by Educational Attainment,
2008-10
Age
Source: Calculations based on ACS 2008-2010 incomes and NBER-Taxsim, version 9.0, in constant 2010 dollars.
Table 4 summarizes the estimates of taxes paid by high school completers and associate
degree recipients. Present values at age 23 are calculated using a discount rate of 3.5 percent. All
amounts are expressed in 2010 constant dollars. Table 4 also provides the calculations by gender
and ethnicity.
The first three columns show the amount of federal, State and FICA taxes paid by the
individuals. On average, individuals with an associate degree are expected to contribute
$106,000 in federal taxes, $45,000 in state taxes, and about $148,000 in FICA taxes over their
life time (see bottom panel, columns 1, 2, and 3). In contrast, individuals who completed high
school pay about $46,000 in federal taxes, $24,000 in state taxes, and almost $98,000 in FICA
tax contributions over their life time (top panel, columns 1, 2, and 3).
$-
$4,000
$8,000
$12,000
$16,000
$20,000
$24,000
$28,000
23 26 29 32 35 38 41 44 47 50 53 56 59 62 65
HS AA
24
Table 4: Lifetime Earnings, City, Property and Sales Taxes by Educational Attainment.
Breakdown by Gender and Ethnicity (Present Value at Age 23 at 3.5 Percent Discount Rate)
By Type of Tax
Total
High School Completers
Federal
Income
Tax
Liability
after all
Credits
State
Income
Tax
Liability
after all
Credits
FICA
(OADSI
& HI,
Employee
&
Employer)
City
Income
Tax
(Net)
Property
Tax
NYC
Sales
Tax
NY
State
Sales
Tax
Total High School
Completers
Total
45,749 23,614 97,970 26,788 7,522 15,977 15,682
233,303
Male
70,413 33,627 120,880 33,052 9,281 19,712 19,349
306,313
Female
23,339 13,995 74,343 20,327 5,708 12,124 11,900
161,736
White
71,071 33,860 121,246 33,152 9,310 19,772 19,408
307,819
Black
42,506 22,149 94,361 25,801 7,245 15,388 15,104
222,554
Hispanic
34,734 18,670 86,715 23,710 6,658 14,141 13,880
198,509
Other
30,353 16,934 81,543 22,296 6,261 13,298 13,053
183,738
Associate Degree Recipients
Federal
Income
Tax
Liability
after all
Credits
State
Income
Tax
Liability
after all
Credits
FICA
(OADSI
& HI,
Employee
&
Employer)
City
Income
Tax
(Net)
Property
Tax
NYC
Sales
Tax
NY
State
Sales
Tax
Total Associate
Degree
Total
106,319 45,457 147,564 40,348 11,330 24,064 23,620
398,703
Male
143,330 56,775 172,734 47,230 13,263 28,169 27,649
489,150
Female
83,449 37,471 129,764 35,481 9,964 21,161 20,771
338,061
White
141,502 56,613 172,693 47,219 13,260 28,162 27,643
487,093
Black
99,773 42,877 141,815 38,776 10,889 23,126 22,700
379,955
Hispanic
86,956 39,053 133,057 36,381 10,216 21,698 21,298
348,659
Other
89,391 38,570 129,562 35,883 10,077 21,401 21,007
345,891
Source: earnings’ taxes calculated based on ACS 2008-2010 and NBER-Taxsim, version 9.0, in constant 2010
dollars. Productivity increase of income (the tax base) is 1.5 percent per year. City income, property, NYC Sales and
NY State taxes are calculated based on ACS 2005-2010
17
and City and State sources (see Table A1 in the Appendix
for details). Columns may not sum to total due to rounding.
17
In order to utilize the maximum amount of information about property and sales tax rates, available since 2005,
we utilize ACS between 2005 and 2010.
25
AdditionalTaxRevenuesfromCityIncome,PropertyandSalesTaxes
Based upon other studies, an amount of 5 percent of total income could be added to cover
property and sales taxes (see Levin, Belfield, Muennig & Rouse, 2007, p.24). This amount is
thought to be a conservative approximation,
18
given the characteristics of the taxes in the City
and State of New York. Using the information listed in Table A1 (in the Appendix), we calculate
the sales, property and other local taxes for individuals who reside in New York City. On
average, an associate degree recipient pays almost $100,000 in these taxes ($40,000 in City
income tax, $11,000 in property tax, and about $40,000 in sales taxes; bottom panel, columns 4
to 7), compared to almost $66,000 paid by the average person who graduated from high school
(the breakdown for this person is $27,000 in City income tax, $7,500 in property tax, and about
$32,000 in sales taxes top panel, columns 4 to 7). We should keep in mind that this is the present
discounted value of the higher taxes paid by associate degree recipients relative to high school
completers.
OverallTaxBurden
As shown in Table 4, individuals with an associate degree contribute, on average, almost
$398,700 in lifetime taxes (overall tax contributions from earnings, property and sales) over their
lifetime, present value at age 23. Individuals with a high school diploma or GED pay, on
average, about $233,000 in total tax contributions over their lifetimes. In viewing the benefits to
the taxpayer of an additional associate degree, we can compare the additional tax revenue
contributed by an associate degree recipient with that of a high school completer. Table 5 shows
the difference in the present value of lifetime aggregate taxes between the recipients of these
degrees, by gender and ethnicity. On average, a person with an associate degree contributes
$165,000 more in tax revenues than a person who completed high school. Although we will
address this issue later, note that the value of additional tax revenues alone from an associate
degree is about twice as large as the public investment required to fund the degree (that ratio is
even larger if we take into account that student tuition is part of the institutional cost). An
additional 1,000 associate graduates would generate about $165 million dollars of additional tax
revenue, measured in present value at age 23.
18
We assume total income equals earnings. This is a second conservative assumption, since other income than
earnings may also pay taxes of a different type.
26
Table 5: Lifetime Earnings, City, Property and Sales Taxes: Comparison by Educational
Attainment. Breakdown by Gender and Ethnicity (Present Value at Age 23 at 3.5 Percent
Discount Rate)
High School Associate Associate versus High School
Total
233,303 398,703
165,400
Male
306,313 489,150
182,837
Female
161,736 338,061
176,325
White
307,819 487,093
179,274
Black
222,554 379,955
157,401
Hispanic
198,509 348,659
150,150
Other
183,738 345,891
162,152
In constant 2010 dollars. Columns may not sum to total due to rounding.
ReducedCostsofPublicServicestoTaxpayer
Benefits of additional education to taxpayers comprise not only higher tax revenues from
those with greater levels of educational attainment, but also reductions in the taxpayer cost of
public services. More specifically, if high school graduates are able to obtain associate degrees,
there is strong evidence that they will place fewer cost burdens on public services for health,
public assistance, and criminal justice. In this section, we review the evidence on these benefits.
Health
Considerable empirical literature has summarized the relations between education and
health (e.g. Lleras-Muney, 2005; and Cutler & Lleras-Muney, 2010). Almost all measures of
health status are positively related to educational attainment. Education may improve health
through such mechanisms as healthier lifestyles in terms of nutrition, exercise, and reductions in
substance abuse; better health decisions because of better knowledge and more scientific ways of
addressing health needs; and the obvious possibility that more education may be associated with
other social advantages that correlate with better health. In an attempt to causally account for the
statistical relation between education and health, Cutler and Lleras-Muney (2010) find that a
substantial portion of the education advantage is due to knowledge and cognitive ability. To
estimate the public cost savings on health from receipt of associate degrees, we use public data
sources on public medical expenditures by educational level.
More specifically, we estimate the relationship by drawing on the Medical Expenditures
Panel Survey-2008 (MEPS), which is a nationally representative dataset, but we limit our
analysis to data for individuals residing in the Northeast region, within a metropolitan statistical
area (MSA). Importantly, the measurement of the educational variables in MEPS is recorded at
the time the individual joined the study. This means that if the individual earned any educational
credential afterwards, his educational attainment would be under-reported. In addition to that, the
potential classification of education varies slightly from the one ACS employs. In this case, the
survey reports years of education of the individuals rather than degree received. Since the degree
27
is not reported in these data, we converted 12 years of education to a high school equivalent and
14 years of education to an associate degree, providing an approximation for purposes of
computing public health costs.
Table 6 documents the association between educational attainment and some health
indicators in terms of enrollment and coverage by public health services. The two principal
public sources of spending on health costs are Medicaid and Medicare. Medicare is a federal
program that covers those 65 years and over, as well as those with chronic disabilities (without
age restriction). For populations under 65 in this analysis, the payments are limited to chronic
disabilities without respect to income. Medicaid is a program for low-income recipients, funded
by both federal and State taxpayers. Table 6 shows that the percentage of the general population
covered by each program is greater for high school completers than for associate degree
graduates. We remind the reader that these educational distinctions are approximate and based
upon the years of educational attainment because the data source does not specify the degrees
attained.
Table 6: Health Coverage Indicators by Educational Attainment
12 Years of Education
(High School)
2 Years of College
(Associate)
Percentage ever covered by Medicaid 21.4% 15.5%
Percentage ever covered by Medicare 6.2% 4.4%
Percentage with positive expenditures paid by Medicaid 19.6% 13.8%
Percentage with positive expenditures paid by Medicare 8.4% 5.4%
Source: MEPS-2008; unweighted means, individuals in the Northeast region, within a MSA, ages 23-65.
Similar relationships are documented using ACS 2008-2010, for individuals based in
New York City (Table 7), which allows us to provide a breakdown by gender and race.
Differences in coverage by public sources are greater for women than for men. The higher
percentage of Medicare recipients among the high school graduates than the associate group is
due to a higher proportion of Medicare eligible persons with chronic disabilities.
Table 7: Health Coverage Indicators by Educational Attainment. Breakdown by Gender
and Race
Percentage Covered by
Public Funding
Percentage Covered by
Medicaid
Percentage Covered by
Medicare
High School Associate High School Associate High School Associate
Total
27.8% 19.5%
24.4% 17.2%
5.2% 3.0%
Men 23.1% 17.2% 19.6% 14.3% 4.7% 3.3%
Women 32.5% 21.3% 29.2% 19.3% 5.6% 2.8%
White 22.4% 14.2% 17.0% 11.1% 6.6% 4.2%
Black 28.5% 20.8% 25.3% 18.3% 5.3% 3.0%
Hispanic 30.5% 24.5% 28.0% 23.0% 4.6% 2.2%
Other 31.9% 19.6% 30.3% 17.7% 3.0% 2.1%
Source: ACS 2008-2010, weighted means, individuals 23-65 in New York City.
28
Table 8 shows the present value at age 23 of total health expenditures by educational
attainment. These lifetime medical expenditures are calculated using MEPS-2008, for individuals
living within a MSA. We consider all individuals, with positive or zero health expenditures
(unweighted), ages 23-65. All amounts are expressed in 2010 constant dollars. The table shows
the breakdown by source of payment. Total public health expenditures of individuals with an
associate degree are, on average, about $15,000 in present value at age 23. Total public health
expenditures for individuals who completed high school (or with 12 years of education) are
about $20,000, about one-third higher than for those with the associate degree. Coverage of
Medicare for those under 65 is limited to chronic disease and is not restricted by income. It is
similar for both groups, although associate degree recipients may be better informed about this
coverage. On average, a person with an associate degree costs $5,000 less in public health
expenses than a person who completed high school, with most of the difference found in
Medicaid coverage. If an additional 1,000 new associate degrees can be gained by expanding
ASAP, the savings to the tax payer from subsidized health care alone would be over $5 million.
Table 8: Lifetime Public Health Expenditures, by Educational Attainment (Present Value
at Age 23 at 3.5 Percent Discount Rate)
12 Years of Education
(High School)
2 Years of College
(Associate)
Total Public Expenditures
20,111 15,085
By source of payment:
Medicare 6,878 6,431
Medicaid 10,222 5,257
VA 1,270 1,309
TRICARE 468 689
Other Federal Sources 55 34
Other State and Local Sources 735 549
Other Public 483 816
Source: Author’s calculations using MEPS-2008; weighted means, individuals living in a MSA (all regions), ages
23-65, in 2010 constant dollars.
PublicAssistance
In 1996 the Federal Government passed welfare or public assistance reform, reducing
dramatically the numbers who were eligible for traditional welfare payments and requiring work
assignment and training as well as limiting the length of time that payments could be received.
The following years also witnessed economic growth that further reduced welfare dependency.
As a result, the overall participation in and cost of welfare declined considerably for both New
York City (Chernick & Reimers 2004) and the rest of the nation. As a result, only a small
proportion of the population receives such benefits. Table 9 shows the relationship between
education and receipt of welfare income for individuals in New York City. Table 9 shows the
29
proportion of individuals in New York City who receive welfare income
19
and supplemental
security income,
20
for individuals aged 23-65 and by educational attainment.
21
The proportion of
individuals receiving public housing, broken down by education, is only available for the year
2002, for individuals in metropolitan areas in New York State. The proportion of people
receiving any type of welfare income is lower among individuals whose highest educational
attainment is an associate degree.
Table 9: Welfare Assistance by Educational Attainment
High School Associate
Welfare Income
a
2.9% 2.0%
Supplemental Security Income
a
3.3% 1.8%
Public Housing
b
12.7% 9.7%
Sources: (a) ACS 2005-2010, weighted means, individuals 23-65 in New York City. (b) ACS-2002, weighted
means, individuals 23-65, in New York State, in a metropolitan area.
Table 10 shows the present discounted value at age 23 of the lifetime stream of income
received through welfare assistance, for those with positive welfare income. Values are
expressed in constant dollars for 2010. Total public assistance and welfare income is, on average,
about $11,000 for individuals with an associate degree compared to about $17,000 in present
value for lifetime receipt of public assistance for high school graduates. Readers should keep in
mind that the average payment per member of any education group will be very low if few
members of that group receive benefits. That is, these figures are not for each welfare recipient,
but are averages determined by dividing payments over all members of the educational group
whether receiving public assistance or not. An additional 1,000 associate graduates would
reduce the taxpayer burden for public assistance by about $6 million.
19
According to the definition of variables on IPUMS (Integrated Public Use Microdata Series census microdata for
social and economic research), this variable reports how much pre-tax income (if any) the respondent received
during the previous year from various public assistance programs commonly referred to as "welfare" (identified as
INCWELFR). Assistance from private charities was not included, but the following were included: federal/state
Supplemental Security Income (SSI) payments to elderly (age 65+), blind, or disabled persons with low incomes;
Aid to Families with Dependent Children (AFDC); and General Assistance (GA). (This does not include separate
payments for hospital or other medical care.)
20
How much pre-tax income (if any) the respondent received from Supplemental Security Income (SSI) during the
previous year.
21
ACS provides information about an additional source of income (INCOTHER), which, according to the
questionnaire, measures: “Any such other sources of income received regularly such as Veterans' (VA) payments,
unemployment compensation, child support or alimony”. However, in ACS the variable is constructed as a residual
variable, reporting how much of each respondent's total money income (or losses), as recorded in the total personal
income, came from sources not included in the other IPUMS person-record income variables, such as INCWAGE
(wage and salary income), INCBUSFM (business and farm income), INBUS (Non-farm business income),
INCBUS00 (business and farm income, 2000), INCFARM (farm income), INCSS (Social Security income),
INCSUPP (Supplementary Security Income), INCWELFR (Welfare (public assistance) income), INCINVST
(interest, dividend, and rental income), and INCRETIR (retirement income). Since this information does not allow
us to distinguish which portion of the income would be coming from public assistance sources, we disregard it for
the purposes of the current analysis. ACS collected information on such income during the past 12 months.
30
Table 10: Lifetime Welfare Income, by Educational Attainment (Present Value at Age 23 at
3.5 Percent Discount Rate)
High School Associate
Welfare Income
a
$ 2,221 $ 1,441
Supplemental Security Income
a
$ 4,698 $ 3,013
Housing Subsidy
b
$ 236 $ 134
Food Stamps
b
$ 6,030 $ 2,779
Unemployment Compensation
b
$ 3,884 $ 3,746
Total $ 17,069 $ 11,113
Notes and source: (a) ACS 2005-2010, weighted means, individuals 23-65 in NYC; (b) Trostel (2010), in 2010
constant dollars.
Crime
The relation between education and crime has been studied extensively and summarized
by Lochner (2011). Higher incomes of the more educated raise the risk or opportunity cost of
committing a crime. Education also induces individuals to become more patient, reducing
impulsive behavior (as suggested by Becker & Mulligan, 1997) and reduces the tendency to take
risks. By increasing the expected future punishment in terms of income foregone, education
discourages crime commission. Lochner and Moretti (2004) use a causal modeling approach to
estimate the impact of education on commission of different crimes, using the US population
census and the crime reports from the Federal Bureau of Investigation (FBI).
Table 11 shows the relationship between education and crime (nationally, for the first
row, and for individuals within a MSA in the Northeast region). The first row is based on Trostel
(2010), who reports the percentage of individuals who are incarcerated by educational
attainment. The rate of incarceration for individuals with a high school diploma or equivalency is
considerably higher than the proportion of individuals with an associate degree who are
incarcerated, even though overall rates at any time for both groups are low. Despite the fact that
these percentages are calculated using nationally representative information, they are similar to
the ones calculated using ACS for individuals who are incarcerated from New York City. The
table also shows the relationship between other crime-related activities and education, using
information from the National Longitudinal Survey of Youth, 1997 (1997-2009), for individuals
23-29, in the Northeast region, in a metropolitan area. Individuals with a high school credential
are more likely to have been arrested since the last interview, have used marijuana, and have
been in prison, than individuals with an associate degree.
22
The consumption of cocaine or other
drugs (other than marijuana, since last interview) is constant across the two educational groups.
22
Educational categories with NLSY97 are constructed in the following way: HS: GED or high school graduates;
AA: Not enrolled-Some college/two-year college; enrolled in a two-year college.
31
Table 11: Proportion of Incarceration and Participation in Other Crime-Related Activities
High School Associate
Proportion Incarcerated
a
1.19% 0.32%
Proportion arrested since last interview
b
6.0% 3.1%
Proportion used marijuana since last interview
b
30.2% 24.4%
Proportion used cocaine or other drugs since last interview
b
3.1% 3.1%
Proportion current dwelling: "in prison"
b
,c
1.2% 0.4%
Sources: (a) Trostel (2010), based on Harlow (2003). (b) NLSY97 (pooled 1997-2009) weighted means, individuals
in the Northeast region, within a MSA, ages 23-29 (c) In Jail/Prison/Detention/Work Release.
Following Belfield, Levin, & Rosen (2012), in order to calculate the total burden
associated with crime we need to take into account public costs associated with correction, police
protection and the other costs of the criminal justice system. Trostel (2010) calculates the
estimated lifetime corrections cost for individuals with high school credentials and associate
degrees. The correction costs, as explained by Trostel (2010), are calculated “using all correction
costs, including probation” (p. 237, footnote 24). In 2010 dollars, the present discounted value of
these costs is about $11,400 for an individual who graduated from high school (Table 12). These
costs contrast with a cost that is less than $3,500 for a person with an associate degree. The
present value of the difference in lifetime costs of crime for an average individual from the two
educational groups is about $7,900. Regarding the other crime-related categories, Belfield, Levin
& Rosen (2012) report that correction costs account only for about 20 percent of annual
government expenditures on crime nationally (see Appendix Table, p. 39).
23
Police protection
costs account for 54 percent of government expenditures on crime (we assume that half of the
amount spent on police protection is devoted to crime prevention or crime apprehension, which
is the relevant portion for our study), while judicial and legal costs are 26 percent of total costs.
We use these proportions to provide some estimates of additional crime costs associated with
police protection costs and the costs of the criminal justice system expenditures. Judicial and
legal costs over a lifetime are about $15,000 for a person who completed high school. These
costs are about $4,500 for a person with an associate degree. The present value of the difference
in lifetime judicial and legal costs for an average individual from the two educational groups is
about $10,400. Finally, police protection costs incurred over a lifetime are about $15,600 for a
person who completed high school. These costs are less than $4,800 for a person with an
associate degree. The present value of the difference in lifetime costs of police protection costs
for an average individual from the two educational groups is about $10,800.
When each of these cost-savings components is added, the expected public savings from
lower criminal involvement of associate degree recipients relative to high school graduates is
about $30,000 per additional associate degree. This means that the taxpayer savings in costs of
the criminal justice system for another 1,000 associate graduates would be about $29 million, a
very substantial amount.
23
In the absence of specific data on this statistic for New York City, we use the national figure.
32
Table 12: Lifetime Crime Costs, by Educational Attainment (Present Value at Age 23 at 3.5
Percent Discount Rate)
High School Associate
Total
$41,857 $12,725
Correction
$11,391 $3,463
Judicial and Legal
$14,908 $4,532
Police Protection
a
$15,558 $4,730
Source: Trostel (2003) and Belfield, Levin and Rosen (2012).
Note: (a) This value corresponds to half of the amount that would be estimated using Belfield et al’s (2012)
calculation. We assume that half of the total amount spent on prevention activities is devoted to crime prevention
and crime apprehension. In constant 2010 dollars.
SummaryofTaxpayerBenefits
Table 13 provides a summary of the direct fiscal benefits to the taxpayer for producing an
additional associate degree. Most of the benefits are generated from the additional tax revenues
of associate degree recipients, amounting to about $165,000 (or 80 percent). However, there are
substantial benefits from reduced costs of public health, public assistance and criminal justice,
amounting to about $40,000 (or 20 percent). Overall, each additional associate degree provides
fiscal benefits to the taxpayer of $205,000 in present value of lifetime benefits at age 23. That is,
the achievement of an associate degree by high school completers provides considerable relief
for the taxpayer by making the investment in additional associate degrees.
Table 13: Generation of Total Fiscal Benefits to the Taxpayer per Degree (Present Value of
Lifetime Benefits at Age 23)
Per Additional Associate Degree
Total Public Benefits $205,514
Tax Revenues From Income
a
$145,567
Property and Sales Taxes $19,833
Savings-Health Expenditures-Public
b
$5,026
Savings-Welfare and Public Assistance $5,956
Savings-Criminal Justice $29,132
Note: (a) Includes Federal, State, FICA, and City Income taxes; (b) Includes Medicare, Medicaid, VA, TRICARE,
Other Federal, State, and Local Sources, and Other Public. In constant 2010 dollars.
NETBENEFITSOFASAPFORTHETAXPAYER
Although there are considerable benefits to the taxpayer from this investment, it is
important to take account of the investment cost to produce an associate degree. There are two
ways to express this comparison. The first is to subtract the cost of the taxpayer investment for
increasing the number of associate degree holders from the taxpayer benefits produced by the
additional associate recipients. Do the benefits exceed the costs, and by how much? A second
way is to provide a contrast of the ratio of benefits to costs to ascertain the dollar return in
33
benefits for each dollar of costs. Table 14 provides estimates for both types of comparisons of
benefits and costs.
Total institutional cost per graduate in Table 14 is taken from Table 1 and is about
$66,000 for the comparison group and about $59,000 for ASAP. We have assumed for simplicity
that the public institutional cost per graduate is charged to the taxpayer. As mentioned earlier,
this is an overestimate of the public cost because some of this cost will be paid by the student.
By overstating the public costs, we will be imparting a very conservative estimate of the
difference between benefits and costs because of the inclusion of the student fees in the taxpayer
burden. However, we will subsequently look more specifically at the costs and benefits for
students.
Table 14 also shows that the total fiscal benefits received by the taxpayer per additional
degree are $205,514 (from Table 13). The net benefits received by the taxpayer, however,
require deduction of the investment required to obtain the fiscal benefits. By subtracting the cost
of the taxpayer outlay, we obtain the net investment return to the taxpayer. After accounting for
the cost of the investment, there is a net return in the present value of benefits to the taxpayer of
about $140,000 for each additional graduate in the comparison group, and about $146,000 for
each additional ASAP graduate. The benefit to cost ratio for the taxpayer is 3.1 for each
additional graduate in the comparison group and 3.5 for each additional ASAP graduate. This
means that each additional associate degree graduate provides between three to four dollars in
return to the taxpayer for every dollar of taxpayer investment. Expressed in terms of the
equivalent of a certificate of deposit (CD) type of investment returned to the taxpayer, each
additional associate graduate from ASAP provides to the taxpayer the equivalent of a CD worth
$146,000, a very sizable amount.
Table 14: Benefits to Cost Comparisons for the Taxpayer: Total Institutional Costs versus
Direct Benefits
Benefits per
Additional Degree
(Taxpayer)
Institutional Cost per
Graduate (Taxpayer)
Benefits Minus
Costs (Net Benefits)
(Taxpayer)
Benefit/Cost
Ratio
(Taxpayer)
Fall 2006
Comparison
Group
$205,514
$65,884
$139,630
3.1
Fall 2007
ASAP
Cohort
$205,514
$59,302
$146,212
3.5
In constant 2010 dollars.
Although this is a very impressive return on public investment for each graduate, it does
not take account of the massive increase in numbers of additional graduates attributed to ASAP.
Recall that ASAP has a three-year graduation rate of almost 55 percent, in contrast to less than
25 percent for the traditional program. If 1,000 students enter the traditional program, about 240
34
would be expected to graduate in three years. If 1,000 students enter the ASAP program, we
would expect more than twice as many, about 549, to graduate. Using the cost and net benefit
per graduate and the number of graduates in each group (see Table 14 and Levin & Garcia,
2012), the fiscal return on investment shows much larger returns to the public investment in
ASAP than in the traditional program. As shown in Table 15 for this comparison, the total net
benefits associated with the enrollment of 1,000 students in ASAP are about $46,000,000
higher than the net benefits associated with a similar initial enrollment for the comparison
group. Total net benefit associated with actual current 2012/13 CUNY ASAP enrollment (2,200
students), is estimated to be $102,000,000 over and above a similar comparison group
enrollment. This is a sizable difference in impact in the use of tax resources in favor of ASAP, as
well as providing considerably higher efficiency in assisting community college students to
complete their studies, a winning strategy for students, taxpayers, and CUNY.
Table 15: Net Present Value of the Taxpayer Investment for 1,000 ASAP Enrollees versus
1,000 Traditional Students
Enrollees
Graduates per
1,000 Enrollees
Net Benefits per
Graduate
Total Net
Benefits per
1,000 Enrollees
Comparison Group
1,000 241.2 $139,630 $33,678,756
ASAP Cohort
1,000 548.6 $146,212 $80,211,903
Difference (ASAP-Comparison)
$6,582 $46,533,147
In constant 2010 dollars.
NETBENEFITSOFASAPFORSTUDENTS
A portion of the cost of acquiring an associate degree, whether in the conventional
program or in ASAP, is incurred by students. Given this cost, it is important to determine the
return to students from this investment. Costs to the student include three components: student
tuition, educational materials, and transportation, and the loss of earnings (or opportunity cost).
Table 16 shows that the total costs paid by the student are $21,000 for the comparison group and
about $13,000 for the ASAP group. Students in ASAP are subsidized for fees or tuition after
application of need-based financial aid awards (ie: federal Pell and New York State Tuition
Assistance Plan (TAP)) as well as transportation and textbooks, but they typically must forego
some earnings while they are studying. Students in the conventional group must incur all of
these costs. We use the information on average tuition as reported on CUNY’s website (see
http://www.cuny.edu/admissions/tuition-fees.html), and on financial aid based on CUNY
ASAP’s analysis of student financial aid data from the CUNY Institutional Research Database
(IRDB). Net tuition is the difference of total tuition and financial aid award for students in the
comparison group. For students in ASAP, the gap between tuition and fees and financial aid
award is waived. We use census data from the ACS to compute the forgone earnings. Foregone
35
earnings are calculated as the difference between the average earnings of a full-time worker with
high school degree, and the average earnings of an enrollee in a public institution (ages 20 to 22),
both expressed as present value at age 23 and in 2010 dollars. Finally, we add the estimated costs
of the textbooks and transportation per student in the comparison group by basing it on the
regular costs on this category for CUNY students (http://www.cuny.edu/admissions/tuition-
fees.html). For ASAP students the costs of textbooks and transportation are covered by the
program.
Table 16: Total Costs Per Graduate, Comparison Group and ASAP Group: Breakdown
per Constituent (Student), for Three Years
Total Fall 2006
Comparison Group
Total Fall 2007
ASAP Group
Total Cost for the Student $20,996
$13,062
Institutional Cost per Graduate-Student $1,569
$0
Average Tuition $9,403
$11,112
Average Financial Aid ($7,834)
($8,384)
Other Financial Assistance (only ASAP) ($0)
($2,728)
Net Forgone Earnings $13,062
$13,062
Earnings HS graduates Working Full Time $28,515
$28,515
Earnings HS graduates Enrolled in Public Institutions ($15,453)
($15,453)
Textbooks and Transportation $6,365
$0
Notes:
Institutional Cost per Graduate: for comparison group, equals the difference between average tuition (60 credits)
and financial aid. Sources: http://www.cuny.edu/admissions/tuition-fees.html and CUNY ASAP’s analysis of
student financial aid data from CUNY Office of Institutional Research and Assessment's Institutional Research
Database (OIRA, IRDB), for the first cohort. For the ASAP group, any remaining difference between total average
tuition (3 years, full-time enrollment) and financial aid award is waived (Linderman & Kolenovic, 2012).
Net Forgone Earnings correspond to the present value at age 23 of the average earnings of a person who completed
high school, at ages 20, 21 and 22, minus the present value at age 23 of the average earnings of a person who
completed high school and is attending a public school, at ages 20, 21 and 22. The average earnings are calculated as
the weighted mean earnings of individuals with such educational attainment in New York City, using ACS (2008-
2010). The forgone earnings per graduate are assumed to be equal to these average earnings, regardless of being in
the comparison or ASAP groups.
Average Textbook and Transportation Costs per Student are obtained from CUNY’s tuition and fees website (see
http://www.cuny.edu/admissions/tuition-fees.html). Total costs in this category equal the cost in FY2012 multiplied
by 3 years. In constant 2010 dollars.
The discount rate used to calculate the present value at age 23 is 3.5 percent.
The total direct benefits to the associate graduate in additional income beyond that of a
high school graduate is shown in Table 17. These incremental income gains are calculated after
the student pays income taxes on gross earnings differences. The income gains minus costs paid
by the student are about $138,000 for each additional graduate in the comparison group, and
about $146,000 for each additional graduate in ASAP. The benefit to cost ratio for the associate
recipient is 7.6 for each additional graduate in the comparison group and 12.2 for each additional
ASAP graduate. Another way of stating the gains to the student beyond the costs paid (including
foregone earnings for three years) is that the income advantage of an associate degree beyond
36
high school completion is the equivalent of being given a certificate of deposit (CD) of about
$140,000 net of taxes. This provides a powerful incentive for students to undertake an associate
degree at CUNY.
Table 17: Net Benefits for the Student: Total Student Costs versus Benefits
After-tax Income
Benefits per
Degree (Student)
Total Cost per
Degree (Student)
Benefits minus
Costs (Net
Benefits)
(Student)
Benefit/Cost
Ratio
(Student)
Fall 2006
Comparison
Group
$158,742
$20,996
$137,746
7.6
Fall 2007
ASAP
Group
$158,742
$13,062
$145,680
12.2
In constant 2010 dollars.
SENSITIVITYANALYSIS
All estimates of benefits and costs require assumptions and data on which the
calculations are based. It is important to challenge key assumptions to ascertain their validity
and to estimate consequences for the results if other plausible assumptions were used. Three
potential sources of concern that can affect the estimates are: (1) insufficient recognition of
comprehensiveness of benefits; (2) external effects of the investment; and (3) mobility of
graduates.
ComprehensivenessofBenefits
As McMahon (2009) has enumerated and explained in detail, there are many benefits of
educational investments for both the individual and for the society. Because many of these
cannot be readily measured or lack good data, we have not included them in this study. For
students we include only the higher incomes represented by their greater employment and higher
productivity. We do not include the value of the benefits to the educated person of better adult
health, greater life expectancy, improved educational development and health status of offspring,
or better consumer decisions, all of which have been linked by McMahon (2009) and others (e.g.
Haveman & Wolfe 1984) to education. This is also true for such social benefits emanating from
a more educated population such as a better functioning democracy, scientific and cultural
progress, and greater equity and social opportunities for those from lower income backgrounds.
Our lack of ability to measure and obtain data on a full range of benefits means that the full
benefits are even greater, perhaps much greater, than those that we have captured. Thus, our
estimates of net benefits are highly conservative ones.
24
24
Another excluded benefit would be associated with the higher likelihood of students in ASAP of enrolling in four-
year institutions and pursuing more education. Based on Linderman and Kolenovic (2012), CUNY ASAP estimates
37
Externalities
Benefits to New York City and its taxpayers are not limited just to those who have
received the associate degree. The economics literature has demonstrated that as the educational
level of a city rises, there are also benefits to workers with other levels of education. These
externalities or spillover benefits result because a higher average level of education in the labor
force also improves the productivity of other workers, even those with lower levels of education.
The production of goods and services becomes more efficient with benefits that extend beyond
just those who have been able to increase their own education.
For example, manufacturing plants located in cities where the fraction of college
graduates grew faster experienced larger increases in productivity than similar plants in cities
when the fraction of college graduates grew more slowly (Moretti 2004b: 683). A one-
percentage point increase in college graduates was associated with a 0.5-0.7 percent increase in
productivity and with a 1.1 percentage points in higher wages (Moretti 2004b: 683-4 and
footnote 45). Research also shows that as the share of college educated persons rise in a city, the
wages of groups with other levels of education also benefit (Abel and Dietz 2012, Moretti
2004a). McMahon (2006) estimated that the contribution of the aggregate education of the labor
force to the earnings of workers of any given level of education was substantial.
Mobility
A further concern for sensitivity analysis is the issue of whether the benefits of taxpayer
investment remain in the City and State whose taxpayers have made the investment. If many
individuals move to other jurisdictions, the benefits will go to taxpayers in those places rather
than New York City or New York State. In order to assess the return on the City’s and State’s
investment in promoting the graduation of CUNY’s associate degree students, we examine the
mobility of the graduates from CUNY. We use the information from the Office of Policy
Research, which surveyed a random sample of CUNY graduates (holding AA, BA, MA, JD and
PhD degrees) who graduated between 1981 and 2008. The survey (conducted in September
2008) examined the cohorts graduating every three years, a sample composed of nearly 13,000
graduates.
Figure 4 shows the proportion of associate graduates from 1981 to 2008 (by graduation
and year) currently residing in New York City or New York State. Among associate graduates,
the proportions residing in the City or State were as high as 97 percent for recent graduates and
89 percent even for graduates as long ago as 1981. Thus, we can conclude that an overwhelming
portion of the total benefits estimated above is provided to New York City taxpayers.
that transfer rates of ASAP students who received the associate degree to a four-year institution are higher than
those of associate degree recipients in the comparison group. Specifically, 72.4 percent of ASAP associate degree
recipients versus 62.2 percent of associate degree recipients in the comparison group transferred to a baccalaureate
institution.
38
New York State taxpayers also get a substantial share of benefits from both the presence
of New York City resident graduates and those in other parts of the State. Even if we assume that
only 80 percent of the associate graduates stay in New York City after completing their degrees,
the taxpayer benefits would still be several times the taxpayer costs.
Figure 4: Proportion of CUNY’s Associate Graduates Currently Residing in New York
State and New York City by Graduation Year, 1981-2008 (in Percentages)
Source: CUNY, Office of Policy Research. Policy Research Brief: “Do CUNY Graduates Stay in New York?”
AHIGHLYPRODUCTIVEINVESTMENT
This study has undertaken an economic analysis of both the public investment of the
taxpayer and the private investment of the student to compare the benefits and costs for each
constituency of investing in ASAP. An earlier study established that although ASAP
underwrites the cost of additional services relative to those allotted to the conventional associate
degree program, the greater success of ASAP enrollees in completing the associate degree within
three years more than compensates for the extra costs (Levin & Garcia 2012). In fact, the cost
for each ASAP degree is less than that of the conventional program because of its higher success
rate of completion.
In contrast, this study asked if there was a positive financial return on the ASAP
investment for the taxpayer and for the students in the program. Two types of analysis were
undertaken. First, the benefits to the taxpayer were compared with the taxpayer cost per three-
year associate degree under ASAP and the traditional program. The returns to the taxpayer were
comprised of the additional tax revenues from the higher income of associate graduates as well
as the reduced cost of public services associated with the associate recipients relative to high
school completers. In order to make comparisons over a lifetime for the gains in tax revenues
88.7
87.3
82.1
81.2
70.2
88.2
91.5
94.8
96.8
0
20
40
60
80
100
1981 1984 1990 1993 1996 1999 2002 2005 2008
NY State NY City Total
39
and reduction of public costs, this study drew upon official data sources for New York City and
New York State. Lifetime benefits were converted to their present value at age 23 and compared
with the taxpayer and student investment cost valued at age 23. In both cases, the benefits far
exceeded costs. For each dollar of investment in ASAP by taxpayers, the return was between
three and four dollars. For each dollar of investment by students, the return was much more,
even when including foregone earnings by students as the major component of student costs.
Using available data on which public constituencies receive the benefits—federal, New York
State, and New York City governments, we believe that all constituencies receive benefits that
exceed their cost contributions to the investment (see Appendix Table A5).
From a policy perspective, the full magnitude of the returns to the taxpayer must take
account of the highly superior effectiveness of ASAP in comparison with the conventional
program. About 55 percent of ASAP students were able to complete the associate degree in
three years compared with about 24 percent of the students in the conventional program. For
every 1,000 enrollees in ASAP, about 549 would be expected to complete the associate
requirement in three years compared with only about 241 in the conventional program. When
converted into overall benefits generated by the 1,000 enrollees, the considerably higher
productivity of ASAP in producing associate degrees would provide fiscal benefits to the
taxpayers of $46 million dollars beyond those of investing an approximately equal amount in the
conventional degree program.
Not only is ASAP less costly per additional graduate and twice as effective in the
production of associate degrees, but from the perspective of both taxpayer and student, the
benefits generated by ASAP represent a very productive public investment with a high monetary
return. Needless to say, this powerful public investment is buttressed further by the other
substantial educational contributions and success that cannot be assessed in monetary terms.
40
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43
Appendix
Table A1: Summary of Sources of Information
New York City New York State National Source Others
Personal Income
ACS 08-10
Income Tax
ACS 08-10 NBER Taxsim
Sales Tax
ACS 05-10; Aggregate general
sales tax revenues in NYC are
available on:
http://www.ibo.nyc.ny.us/; Fiscal
history; Revenue and Spending
since 1980; Tax revenues.
NYC sales tax bases (between
2005 and 2010) are available on
http://www.tax.ny.gov/pdf/stats
/stat_excise/taxable_sales_and_
purchases_march2009_february
2010.pdf.
Levin, H., C. Belfield, P.
Muennig and C. Rouse
(2007)
Property Tax
ACS 05-10; City of New York-
Department of Finance, Office of
Tax Policy
Levin, H., C. Belfield, P.
Muennig and C. Rouse
(2007)
Other City Taxes
(Personal income tax) ACS 05-
10; Aggregate Personal Income-
net- tax revenues in NYC are
available on:
http://www.ibo.nyc.ny.us/; Fiscal
history; Revenue and Spending
since 1980; Tax revenues
Public Health
ACS 08-10 MEPS-2008
Public Assistance
ACS 08-10 (welfare income)
ACS 2002 (public housing)
Trostel (2010)
Crime
Uniform Crime Reporting
Statistics UCR Data Online
http://www.ucrdatatool.gov/
Estimated crime in New York
-NLSY-97 (% ever arrested;
consumption of drugs, marijuana; %
in prison)
-Bureau of Justice Statistics (
http://www.bjs.gov/index.cfm?ty=p
bdetail&iid=4333)
-Justice system expenditure by
character, state and type of
government, fiscal year 2008
Supplemental data for 49 large city
governments
Trostel (2010)
Belfield, Levin, Rosen
(2012)
44
Table A2: Tax Revenue Gains for Married People
By Type of Tax
Total
High School Completers
Federal
Income Tax
Liability
after all
Credits
State
Income Tax
Liability
after all
Credits
FICA (OADSI &
HI, Employee &
Employer)
City
Income
Tax (Net)
Property
Tax
NYC Sales
Tax
NY State Sales
Tax
Total HS
Total
4,304 11,479 97,970
26,788 7,522 15,977 15,682
179,723
Male
23,082 19,030 120,880
33,052 9,281 19,712 19,349
244,386
Female
-10,573 4,704 74,343
20,327 5,708 12,124 11,900
118,533
White
23,543 19,206 121,246
33,152 9,310 19,772 19,408
245,637
Black
2,332 10,562 94,361
25,801 7,245 15,388 15,104
170,793
Hispanic
-3,788 7,937 86,715
23,710 6,658 14,141 13,880
149,253
Other
-5,420 6,931 81,543
22,296 6,261 13,298 13,053
137,963
Associate Degree Recipients
Federal
Income Tax
Liability
after all
Credits
State
Income Tax
Liability
after all
Credits
FICA (OADSI &
HI, Employee &
Employer)
City
Income
Tax (Net)
Property
Tax
NYC Sales
Tax
NY State Sales
Tax
Total AA
Total
46,827 28,725 147,564
40,348 11,330 24,064 23,620
322,478
Male
70,633 38,903 172,734
47,230 13,263 28,169 27,649
398,581
Female
31,116 22,288 129,764
35,481 9,964 21,161 20,771
270,545
White
69,914 38,568 172,693
47,219 13,260 28,162 27,643
397,460
Black
42,485 26,879 141,815
38,776 10,889 23,126 22,700
306,670
Hispanic
33,805 23,495 133,057
36,381 10,216 21,698 21,298
279,949
Other
36,353 24,111 129,562
35,883 10,077 21,401 21,007
278,394
Source: earnings’ taxes calculated based on ACS 2008-2010 and NBER-Taxsim, version 9.0, in constant dollars of 2010. Productivity increase of income (the tax
base) is 1.5 percent per year. City income, property, NYC Sales and NY State taxes are calculated based on ACS 2005-2010 and City and State sources (see
Table A1 in the Appendix for details).
45
Table A3: Lifetime Earnings, City, Property and Sales Taxes by Educational
Attainment (for Married People)
Married
HS Associate
Associate minus HS
Total
179,723 322,478
142,755
Male 244,386 398,581 154,195
Female 118,533 270,545 152,011
White 245,637 397,460 151,822
Black 170,793 306,670 135,877
Hispanic 149,253 279,949 130,696
Other 137,963 278,394 140,431
In constant 2010 dollars.
Table A4: Lifetime Earnings, City, Property and Sales Taxes by Educational
Attainment: Single Minus Married
HS Associate
Associate minus HS
Total
53,580 76,224
22,645
Male 61,927 90,569 28,642
Female 43,202 67,517 24,314
White 62,182 89,633 27,451
Black 51,761 73,285 21,525
Hispanic 49,256 68,710 19,454
Other 45,776 67,497 21,721
In constant 2010 dollars.
46
Table A5: Approximate Distribution of the Benefits by Government Level
Total
Fiscal
Benefits
per AA
Degree
Amount % Allocation
City State Federal City State Federal City State Federal
Total Public
Benefits
$205,514
$37,444 $47,970 $120,100 18.2% 23.4% 58.4%
Tax Revenues
from Income
$145,567
$13,560 $21,843 $110,164 9.3% 15.0% 75.7% City income tax
State income tax liability
after all credits
Federal income
tax liability after
all credits;
FICA
Property and
Sales Taxes
$19,833
$11,895 $7,938 60.0% 40.0% Property tax, NYC sales tax NY sales tax
Savings-Health
Expenditures-
Public
$5,026
($18) $2,465 $2,580 -0.4% 49.0% 51.3%
Other State and Local
Sources (50%); Other public
(33%)
Medicaid (50%
(a)
); Other
State and Local Sources
(50%); Other public (33%)
Medicare;
Medicaid
(50%); VA;
TRICARE;
Other Federal
sources; Other
public (33%)
Savings-Welfare
and Public
Assistance
$5,956
$882 $69 $5,005 14.8% 1.2% 84.0%
Welfare income; Housing
subsidy
Unemployment
compensation (50%)
SSI; Food
stamps;
Unemployment
compensation
(50%)
Savings-
Criminal Justice
$29,132
$11,125 $15,655 $2,351 38.2% 53.7% 8.1%
Correction and Judicial and
Legal: Proportion of
prisoners in local jail
facilities
(b)
; Police
protection: %NYCPD
budget
(c)
/(NYCPD
budget+8.2/19.5
(e)
)*Annual
budget State Police
(d)
)
Correction and Judicial and
Legal: Proportion of
prisoners in State prisons
(b)
;
Police protection:
%8.2/19.5*Annual budget
State Police/(NYCPD
budget+8.2/19.5*Annual
budget State Police)
Correction and
Judicial and
Legal:
Proportion of
prisoners in
Federal
prisons
(b)
Source: (a) Federal Medical Assistance Percentages for NY State, http://aspe.hhs.gov/health/fmap10.htm; (b) Prisoners in 2011, U.S. Department of Justice, Bureau of Justice Statistics; (c)
http://www.nyc.gov/html/omb/html/publications/projections.shtml?65 , FY 2010 Actual, Total, Agency Budget (d)
http://www.budget.ny.gov/pubs/archive/fy1112archive/eBudget1112/fy1112littlebook/BriefingBook.pdf, p.65 (2010-2011); (e) U.S. Census Bureau.
Notes: For the allocation of the police protection costs, we assume the State police department’s budget is allocated in per capita terms. Out of the 19.5 million people in New York State, 8.2 live in New
York City (42 percent). Total police protection budget in NYC equals the NYCPD budget plus 42 percent of New York State police, and it is allocated according to the weight of each budget on the total
budget. In constant 2010 dollars.
