43 Chapter 3: Methodology patterns from the Internal Revenue Service to estimate the number of students who will leave the state workforce over time. We apply another reduction factor to account for the students’ alternative education opportunities. This is the same adjustment that we use in the calculation of the alumni impact and is designed to account for the counterfactual scenario where the Business program does not exist. The assumption in this case is that any benefits generated by Business program students who could have received a similar education even without the program cannot be counted as new benefits to taxpayers. For this analysis, we assume an alternative education variable of 15%, meaning that 15% of the Business program student population would have generated benefits anyway even without the program. For more information on the alternative education variable, see Appendix 8. After adjusting for attrition and alternative education opportunities, we calculate the present value of the future added tax revenues that occur in the state, equal to $13.9 million. Recall from the discussion of the student return on investment that the present value represents the sum of the future benefits that accrue each year over the course of the time horizon, discounted to current year dollars to account for the time value of money. Given that the stakeholder in this case is the public sector, we use the discount rate of 0.2%. This is the three-year average of the real treasury interest rate reported by the Office of Management and Budget (OMB) for 30-year investments, and in Appendix 2, we conduct a sensitivity analysis of this discount rate.43 Government savings In addition to the creation of higher tax revenues to the state government, education is statistically associated with a variety of lifestyle changes that generate social savings, also known as external or incidental benefits of education. These represent the avoided costs to the government that otherwise would have been drawn from public resources absent the education provided by SUNY WCC’s Business program. Government savings appear in Figure 3.3 and Table 3.5 and break down into three main categories: 1) health savings, 2) crime savings, and 3) income assistance savings. Health savings include avoided medical costs that would have otherwise been covered by state government. Crime savings consist of avoided costs to the justice system (i.e., police protection, judicial and legal, and corrections). Income assistance benefits comprise avoided costs due to the reduced number of welfare and unemployment insurance claims. The model quantifies government savings by calculating the probability at each education level that individuals will have poor health, commit crimes, or claim welfare and unemployment benefits. Deriving the probabilities involves assembling data from 43 Office of Management and Budget. “Discount Rates for Cost-Effectiveness, Lease Purchase, and Related Analyses.” Real Interest Rates on Treasury Notes and Bonds of Specified Maturities (in Percent). https://www.whitehouse.gov/ wp-content/uploads/2020/12/discount-history.pdf. In addition to the creation of higher tax revenues to the state government, education is statistically associated with a variety of lifestyle changes that generate social savings.
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