The Economic Value of Long Beach City College
Long Beach City College (LBCC) creates value in many ways. The college plays a key role in helping students increase their employability and achieve their individual potential. The college retains students in the Los Angeles – Orange County Metropolitan Statistical Area (MSA)* and provides students with the education, training, and skills they need to have fulfilling and prosperous careers. Furthermore, LBCC is a place for students to meet new people, increase their self-confidence, and promote their overall health and well-being.
LBCC influences both the lives of its students and the regional economy.
LBCC influences both the lives of its students and the regional economy. The college supports a variety of industries in the Los Angeles – Orange County MSA, serves regional businesses,
and benefits society as a whole in California from an expanded economy and improved quality of life. The benefits created by LBCC even extend to the state and local government through increased tax revenues and public sector savings.
This study measures the economic impacts created by LBCC on the business community and the benefits the college generates in return for the investments made by its key stakeholder groups -students, taxpayers, and society. The following two analyses are presented:
- Economic Impact Analysis
- Investment Analysis
All results reflect employee, student, and financial data, provided by the college, for fiscal year (FY) 2018-19. Impacts on the Los Angeles – Orange County MSA economy are reported under the economic impact analysis and are measured in terms of added income. The returns on investment to students, taxpayers,
and society in California are reported under the investment analysis.
Economic Impact Analysis
LBCC promotes economic growth in the Los Angeles – Orange County MSA through its direct expenditures and the resulting expenditures of students and regional businesses. The college serves as an employer and buyer of goods and services for its construction and day-to-day operations. The college’s activities retain students from inside the Los Angeles – Orange County MSA, whose expenditures benefit regional vendors. In addition, LBCC is a primary source of higher education to the Los Angeles – Orange County MSA residents and a supplier of trained workers to regional industries, enhancing overall productivity in the regional workforce.
Operations Spending Impact
LBCC adds economic value to the Los Angeles – Orange County MSA as an employer of regional residents and a large-scale buyer of goods and services. In FY 2018-19, the college employed 1,997 full-time and part-time faculty and staff, 96% of whom lived in the Los Angeles – Orange County MSA. Total payroll at LBCC was $152.7 million, much of which was spent in the region for groceries, mortgage and rent payments, dining out, and other household expenses. In addition, the college spent $52.6 million
on day-to-day expenses related to facilities, supplies, and professional services.
LBCC’s day-to-day operations spending added $213.7 million in income to the region during the analysis year. This figure represents the college’s payroll, the multiplier effects generated by the in-region spending of the college and its employees, and a downward adjustment to account for funding that the college received from regional sources. The $213.7 million in added income is equivalent to supporting 2,442 jobs in the region.
Construction Spending Impact
LBCC invests in construction each year to maintain its facilities, create additional capacities, and meet its growing educational demands. While the amount varies from year to year, these quick infusions of income and jobs have a substantial impact on the regional economy. In FY 2018-19, LBCC’s construction spending generated $15.6 million in added income, which is equivalent to supporting 190 jobs.
Student Spending Impact
Some in-region students, referred to as retained students, would have left the Los Angeles – Orange County MSA if not for the existence of LBCC. While attending the college, these retained students spent money on groceries, accommodation, transportation, and other household expenses. This spending generated $69.8 million in added income for the regional economy in FY 2018-19, which supported 1,204 jobs in the Los Angeles – Orange County MSA.
The education and training LBCC provides for regional residents has the greatest impact. Since its establishment, students have studied at LBCC and entered the regional workforce with greater knowledge and new skills. Today, hundreds of thousands of former LBCC students are employed in the Los Angeles – Orange County MSA. As a result of their LBCC educations, the students receive higher earnings and increase the productivity of the businesses that employ them. In FY 2018-19, LBCC alumni generated $1.3 billion in added income for the regional economy, which is equivalent to supporting 13,282 jobs.
LBCC added $1.6 billion in income to the Los Angeles – Orange County MSA economy during the analysis year, equal to the sum of the operations and construction spending impacts, the student spending impact, and the alumni impact. LBCC’s total impact can also be expressed in terms of jobs supported.
The $1.6 billion impact supported 17,118 regional jobs, using the jobs-to-sales ratios specific to each industry in the region. In addition, the $1.6 billion, or 17,118 supported jobs, stemmed from different industry sectors. Among noneducation industry sectors, LBCC’s spending and alumni in the Health Care & Social Assistance industry sector supported 3,990 jobs in FY 2018-19. These are impacts that would not have been generated without the college’s presence in the Los Angeles – Orange County MSA.
An investment analysis evaluates the costs associated with a proposed venture against its expected benefits. If the benefits outweigh the costs, then the investment is financially worthwhile. The analysis presented here considers LBCC as an investment from the perspectives of students, taxpayers, and
society in California.
In FY 2018-19, LBCC served 33,644 credit and 1,865 noncredit students. In order to attend the college, the students paid for tuition, fees, books, and supplies. They also took out loans and will incur interest on those loans. Additionally, students gave up money they would have otherwise earned had they been working instead of attending college. The total investment made by LBCC’s students in FY 2018-19 amounted to a present value of $88.5 million, equal to $36.9 million in out-of-pocket expenses
(including future principal and interest on student loans) and $51.6 million in forgone time and money.
In return for their investment, LBCC’s students will receive a stream of higher future earnings that will continue to grow throughout their working lives. For example, the average LBCC associate degree graduate from FY 2018-19 will see annual earnings that are $10,300 higher than a person with a high school diploma or equivalent working in California. Over a working lifetime, the benefits of the associate degree over a high school diploma will amount to an undiscounted value of $422.3 thousand in higher earnings per graduate. The present value of the cumulative higher future earnings that LBCC’s FY 2018-19 students will receive over their working careers is $730.7 million.
The students’ benefit-cost ratio is 8.3. In other words, for every dollar students invest in LBCC, in the form of out-of-pocket expenses and forgone time and money, they will receive a cumulative value of $8.30 in higher future earnings. Annually, the students’ investment in LBCC has an average annual internal rate
of return of 25.3%, which is impressive compared to the U.S. stock market’s 30-year average rate of return of 9.9%.
LBCC generates more in tax revenue than it takes. These benefits to taxpayers consist primarily of taxes that the state and local government will collect from the added revenue created in the state. As LBCC students will earn more, they will make higher tax payments throughout their working lives. Students’ employers will also make higher tax payments as they increase their output and purchases of goods and services. By the end of the FY 2018-19 students’ working lives, the state and local government will have collected a present value of $264.3 million in added taxes.
For every dollar of public money invested in LBCC, taxpayers will receive a cumulative value of $1.90 over the course of the students’ working lives.
Benefits to taxpayers will also consist of savings generated by the improved lifestyles of LBCC
students and the corresponding reduced government services. Education is statistically correlated
with a variety of lifestyle changes. Students’ LBCC educations will generate savings in three main categories: 1) healthcare, 2) crime, and 3) income assistance. Improved health will lower students’ demand for national health care services. In addition, students will be less likely to interact with the criminal justice system, resulting in a reduced demand for law enforcement and victim costs. LBCC students will be more employable, so their reduced demand for income assistance such as welfare and unemployment benefits will benefit taxpayers. For a list of study references, contact the college for a
copy of the main report. Altogether, the present value of the benefits associated with an LBCC education will generate $37.8 million in savings to state and local taxpayers.
Total taxpayer benefits amount to $302.2 million, the present value sum of the added taxes and public sector savings. Taxpayer costs are $159.2 million, equal to the amount of state and local government funding LBCC received in FY 2018-19. These benefits and costs yield a benefit-cost ratio of 1.9. This means that for every dollar of public money invested in LBCC in FY 2018-19, taxpayers will receive a cumulative value of $1.90 over the course of the students’ working lives. The average annual internal rate of return for taxpayers is 4.8%.
Society as a whole in California benefits from the presence of LBCC in two major ways. Primarily, society benefits from an increased economic base in the state. This is attributed to higher student earnings and increased business output, which raise economic prosperity in California.
Benefits to society also consist of the savings generated by the improved lifestyles of LBCC students. As discussed in the previous section, education is statistically correlated with a variety of lifestyle changes that generate social savings. Note that these costs are avoided by the consumers but are distinct from the costs avoided by the taxpayers outlined above. Healthcare savings include avoided medical costs associated with smoking, alcohol dependence, obesity, drug abuse, and depression. Savings related to crime include reduced security expenditures and insurance administration, lower victim costs, and
reduced expenditures by the criminal justice system. Income assistance savings include reduced welfare and unemployment claims. For a list of study references, contact the college for a copy of the main report.
Altogether, the social benefits of LBCC equal a present value of $4.1 billion. These benefits include $4.1 billion in added income through students’ increased lifetime earnings and increased business output, as well as $58.6 million in social savings related to health, crime, and income assistance in California. People in California invested a present value total of $308.2 million in LBCC in FY 2018-19. The cost includes all the college and student costs.
The benefit-cost ratio for society is 13.3, equal to the $4.1 billion in benefits divided by the $308.2 million in costs. In other words, for every dollar invested in LBCC, people in California will receive a cumulative value of $13.30 in benefits. The benefits of this investment will occur for as long as LBCC’s FY 2018-19
students remain employed in the state workforce.
Summary of Investment Analysis Results
The results of the analysis demonstrate that LBCC is a strong investment for all three major stakeholder groups – students, taxpayers, and society. As shown, students receive a great return for their investments in an LBCC education. At the same time, taxpayers’ investment in LBCC returns more to government budgets than it costs and creates a wide range of social benefits throughout California.
The results of this study demonstrate that LBCC creates value from
The results of this study demonstrate that LBCC creates value from multiple perspectives. The college benefits regional businesses by increasing consumer spending in the region and supplying a steady flow of qualified, trained workers to the workforce. LBCC enriches the lives of students by raising their lifetime earnings and helping them achieve their individual potential. The college benefits state and local taxpayers through increased tax receipts and a reduced demand for government-supported social services. Finally, LBCC benefits society as a whole in California by creating a more prosperous economy and generating a variety of savings through the improved lifestyles of students.
Data and assumptions used in the study are based on several sources, including the FY 2018-19 academic and financial reports from LBCC, industry and employment data from the U.S. Bureau of Labor Statistics and U.S. Census Bureau, outputs of Emsi’s Multi-Regional Social Accounting Matrix model, and a variety of studies and surveys relating education to social behavior. The study applies a conservative methodology and follows standard practice using only the most recognized indicators of economic impact and investment effectiveness. For a full description of the data and approach used in the study, please contact the college for a copy of the main report.