From Foresight, No. 49
published 2007
The Kentucky Postsecondary Education Improvement Act of 1997 (HB1) set the goals of improving Kentucky’s system of higher education, increasing the number of college graduates, and, by 2020, achieving “a standard of living or quality of life that meets or exceeds the national average.”(1) Since that time the Council on Postsecondary Education (CPE or the Council) has developed a five-step plan that, if realized, would double the number of four-year degree holders in Kentucky’s adult population by the year 2020. This ambitious goal will be difficult to achieve, but our analysis shows clear economic benefits from its realization.
The Council has projected the percent of Kentucky’s working-age adult population (ages 25 to 64) with a bachelor’s degree or higher to increase from 18.7 percent in 2000, or 402,000 degree holders, to approximately 23.6 percent, or 580,000 working-age adults, by 2020 at current production levels. In order to meet the national projected educational attainment level of 32.1 percent of the population with at least a bachelor’s degree by 2020, Kentucky would need an additional 211,000 degree holders, or 791,000 total, which is approximately double the number of degree holders in 2000 (Figure 1).(2) We refer to these policy scenarios as “current trends” and “double-the-numbers,” respectively.
Using a log-linear model, we estimate the positive relationship between a state’s per capita income (PCI) and the education level of its workers and predict what effect doubling the number of four-year degree holders will have on PCI and general fund (GF) revenue.(3) Figure 2 shows the estimated 2020 PCI associated with 23.6 percent of working-age Kentuckians with at least a bachelor’s degree at approximately $32,776, compared with a 2020 PCI of $36,268 associated with doubling the number of degree holders in the state. Figures 3 and 4 show the corresponding predicted aggregate personal income (API) in 2020 of approximately $161 billion and $179 billion for the two policy scenarios, respectively. And, assuming the revenue elasticity of income equals one (that is, the percentage change in revenue equals the percentage change in income), then the 2020 GF revenues would be approximately $10.5 billion and $11.7 billion, respectively.
Figure 2: Estimated Per Capita Income, Kentucky, 2000-2020
Figure 3: Estimated Aggregate Personal Income, Kentucky, 2000-2020
Figure 4: Estimated Kentucky General Fund Revenue, 2000 to 2020
Taking the summation of API and GF revenue from 2000 to 2020 (the total area under the curves shown in Figures 3 and 4), we estimate a cumulative API of $2.76 trillion and cumulative GF revenue of $152.7 billion under the “current trends” scenario, and $2.90 trillion and $161.7 billion, respectively, under the “double-the-numbers” scenario. Comparing the two scenarios reveals that doubling the number of degree holders could yield an additional $139.5 billion in personal income and $9.0 billion in general fund revenue.(4)
These conservative estimates show that the Commonwealth could realize substantial benefits by doubling the number of degree holders by 2020.(5) Accordingly, the Council has developed a five-step plan designed to produce the additional degree holders needed to reach the 32.1 percent national average (Table 1).(6)
Table 1: Five Steps of CPE Plan to Attain 2020 Goal of Additional Bachelor’s Degree Holders
Step 1 of the intervention plan calls for the production of 66,000 new degree holders by increasing postsecondary participation and quality.(7) As shown in Table 2, we estimate that this step would yield approximately $1,040 more in PCI by 2020.(8) Step 2 will improve GED to college transitions and add 4,000 more degree holders, adding $65 additional dollars to 2020 PCI. Step 3 of the intervention plan will funnel more first-time students through KCTCS and increase the number of degree holders in Kentucky’s working-age population by approximately 26,000, leading to an increase in 2020 PCI of approximately $424. Step 4 of the intervention plan calls for 36,000 more degree holders by raising high school graduation rates and adding $599 in 2020 PCI. Finally, Kentucky will add 79,000 new degree holders to its count through the strategies employed by Step 5, which focuses on increasing migration and economic development. Achieving this step will add approximately $1,365, bringing the total difference in projected 2020 PCI between the “current trends” and “double-the-numbers” scenarios to $3,492.(9)
Here we assess the likelihood of achieving each of the five steps by analyzing past trends and considering future challenges. Analyzing past trends helps to identify those strategies with relatively low, medium, or high likelihoods of attainability. In addition to past trends, other mitigating factors could pose challenges to the full attainment of this plan. For example, increasing enrollment, as well as retention, are significant parts of the strategy for many of the steps outlined in the intervention plan.(10) Yet, a recent report by the Kentucky State Auditor’s Office finds that rising tuition rates for resident students may be depressing enrollments. Moreover, a 2007 report by the Kentucky Developmental Education Task Force notes that “more than half of the first-time freshmen entering Kentucky’s colleges are underprepared in at least one subject … [and] for those underprepared students, the first-year college dropout rate is twice the rate of academically prepared freshmen.”(11) By categorizing each step according to its likelihood of success and its contribution to per capita income, we hope to highlight policy areas that appear to offer the most leverage for ensuring future success.
Step 1. One of the strategies outlined in Step 1 includes a 19 percent increase in the high school college-going rate, raising it from 62 percent in 2002 to 74 percent by 2020. Past trends reveal that this rate was 49 percent in 1992, an increase of over 26 percent in a 10-year period.(12) This step also seeks to increase the postsecondary system’s 2002 six-year bachelor’s degree graduation rate of 43.6 percent to 56 percent by 2020. This rate increased from 38.5 percent in 1993 to the current 2002 rate.(13) Both increases correspond to an approximate average growth rate of 1.4 percent annually. Attaining the number of degree holders identified by this step is highly probable given past trends.(14)
Step 2. A portion of the 4,000 additional degree holders added by Step 2 will be obtained by increasing the annual number of GED graduates from 9,000 to 15,000 by 2020. However, this number declined over a four-year period from 9,452 in 2002-03 to 9,007 in 2005-06.(15) The remaining degree holders will be achieved by increasing the college-going rate of GED graduates from 19 percent in 2002 to 36 percent in 2020. Kentucky has progressed on this indicator, as GED graduates enrolling in college have increased from 12 percent in 1998 to 22 percent in 2005.(16) This projection is based on past growth in this estimate and, by definition, falls in line with past trends. Given the mixed probability of attaining these steps, we consider this to have a “medium” probability of success.
Step 3. To attain the number of degree holders required in Step 3, the state will need to improve KCTCS transfers to four-year institutions from approximately 3,100 to 11,334. Since the 1997-98 school year, this estimate has remained relatively unchanged, fluctuating between a low of 3,613 in 2001-02 to a high of 4,191 in 2004-05.(17) Consequently, the 11,334 is well beyond current numbers. In addition, improving the general education credit transfer and keeping KCTCS tuition low are two more strategies for producing the number of degree holders projected in Step 3. Yet, one of the key findings of the State Auditor’s Report is that “rising tuition is also impacting enrollment in the two-year system.” Historically lower numbers of KCTCS transfers and rising tuition costs suggest that this step has a low likelihood of achievement.
Step 4. A portion of the degree holders in Step 4 results from an increase in the high school graduation rates of 9th graders from 72 percent to 81 percent in 2020. However, this rate has remained relatively unchanged since 1990.(18) The step also calls for enhanced guidance counseling and support services and improvement in teacher preparation programs. Given the unknown impact of the latter two strategies combined with the low likelihood of the former, this step is categorized as having a medium likelihood of realization.
Step 5. This step, by virtue of the number of degree holders, is the most ambitious of the five. In this step of the intervention plan, Kentucky will create new jobs to attract college-educated, out-of-state residents; keep college graduates working in Kentucky; and double the number of jobs requiring at least a bachelor’s degree. However, past trends and future projections suggest a low likelihood for achievement of this goal. For example, a 2004 study found that Kentucky experienced a net gain of approximately 4,800 degree holders over the period 1995 to 2000.(19) Furthermore, according to data from the Council, approximately 61 percent of graduates from Kentucky postsecondary institutions are working in Kentucky five years after graduation, while 86 percent continue living here.(20) Finally, according to a report from the Kentucky Education Cabinet, jobs requiring at least a bachelor’s degree will grow approximately 33 percent, adding approximately 44,100 jobs to the current 2004 employment of 264,182 and will account for only 14 percent of the job growth in the state through 2014.(21)
While we discuss the many challenges to achieving this goal, it is not the purpose of this exercise to suggest that the “double-the-numbers” scenario will not come to fruition. Rather, our objective is to highlight some of the challenges in implementing these strategies and identify areas requiring additional attention. By considering the likelihood of success and the amount of per capita income added by each “step,” we can isolate those steps that are low to medium in regard to the likelihood of their success and medium to high on their contribution to per capita income. As shown in Table 3, Steps 3, 4, and 5 fall into these categories, accounting for two-thirds (141,000) of the increase needed (211,000) to double the number of degree holders. This implies that to fully achieve the “double-the-numbers” scenario, we will need to focus considerable attention on increasing the transition rate from KCTCS to four-year universities, decreasing the high school dropout rate, and developing an economy that can attract and retain high-knowledge workers. These efforts will help increase the 2020 PCI from the $33,880 achieved should the state succeed in realizing only steps 1 and 2 of the intervention plan.(22)
By investing in its workforce and achieving the national rate of working-age adults with a bachelor’s degree or higher by 2020, Kentucky stands to gain billions of dollars in personal income and revenue over what it will achieve at current bachelor’s degree-holder production levels. Possible challenges emerge in several areas as indicated by past trends in the area of education in Kentucky and the potential of mitigating factors for the future. Attracting and keeping new graduates through jobs and community-building will require focused, collaborative efforts on the parts of many in Kentucky, not just the postsecondary education system. Bringing in new jobs and building communities that are attractive to those needed to fill them will require efforts on the part of economic development, the business community, and local and municipal governments, as well as citizens themselves. Sustaining the momentum the state already has in the area of enrollments and graduations will require that tuition rates be monitored as well as other barriers that may hinder the accessibility and affordability of postsecondary education for Kentuckians.
* Dr. Amy L. Watts is an economist at the Center. Return to text.
1 Kentucky Postsecondary Education Improvement Act of 1997, online at http://www.lrc.state.ky.us/recarch/97ss/HB1/bill.doc. Return to text.
2 The United States is fourteenth among developed nations in the percent of its adult population with a bachelor’s degree or higher. Return to text.
3 Per capita income was measured in constant dollars in the models used. All dollars are measured in real terms based on 2003 price levels as measured by the consumer price index. See Technical Appendix for more details on the methodology used to estimate the models. Return to text.
4 This is not a strict cost-benefit analysis as costs are not accounted for here. Return to text.
5 These are selected benefits of increasing the level of educational attainment in Kentucky’s workforce. Studies have shown many other associated outcomes including better health outcomes, higher civic and political engagement of the population, lower incidence of crime, and less reliance on public programs, among others. Return to text.
6 Kentucky Council on Postsecondary Education (CPE), Double the Numbers: Putting Kentucky’s Public Agenda Into Action (CPE: Frankfort, 2006). Return to text.
7 CPE, Double the Numbers. Return to text.
8 See Technical Appendix for a complete account of the aggregate personal income and general fund revenue associated with each step. Return to text.
9 Numbers may not sum to total due to rounding. See Technical Appendix for a full account of the economic benefits attributable to each step. Return to text.
10 Office of the Kentucky State Auditor, Division of Performance Audit, Recent Kentucky Tuition Increases May Prevent the Achievement of the Commonwealth’s 2020 Postsecondary Education Goals, Briefing Report, 12 Feb. 2007. Return to text.
11 CPE, Securing Kentucky’s Future: A Plan for Improving College Readiness and Success, Feb. 2007 http://cpe.ky.gov/NR/rdonlyres/CBAA5350-E515-42E2-8D8B-B5E61286135C/0/DevEdTaskForce_FullReport_FINALFORWEB.pdf. Return to text.
12 These data were gathered from the National Information Center for Higher Education Policymaking and Analysis www.higheredinfo.org. Return to text.
13 These data were drawn from the CPE Comprehensive Database. Return to text.
14 The data CPE used to develop targets measuring adult college participation were developed through a custom analysis by the National Center for Higher Education Management Systems. No comparable historical data exist. Return to text.
15 CPE, Five Questions, One Mission: Better Lives for Kentucky’s People, “2005-06 Kentucky Postsecondary Education Accountability Report,” cpe.ky.gov/planning/statusreports/. Return to text.
16 CPE, Five Questions, One Mission: Better Lives for Kentucky’s People, “2005-06 Kentucky Postsecondary Education Accountability Report,” cpe.ky.gov/planning/statusreports/ and The Kentucky Adult Education Report Card, 2005 cpe.ky.gov/info/adult/index.htm. Return to text.
17 Data were drawn from the CPE Comprehensive Data Base. Return to text.
18 The 72 percent estimate is from “The Average Freshman Graduation Rate for Public High Schools from the Common Core of Data, School Years 2001-02 and 2002-03,” from the National Center for Education Statistics. This estimate was adopted by the Kentucky Department of Education to fulfill requirements of the No Child Left Behind Act. No past data exists that corresponds with the 72 percent estimate. However, historical data on graduation rates are available through the Information Center of the National Center for Higher Education Management Systems, 26 Feb. 2007 http://www.higheredinfo.org/dbrowser/index.php?measure=23. These data show that the high school graduation rate of 9th graders in public institutions in Kentucky remained relatively unchanged and declined slightly from 69 percent in 1990 to 65 percent in 2004. Return to text.
19 Michael Price, Martye Scobee, and Thomas Sawyer, Kentucky Migration: Consequences for State Population & Labor Force (Louisville, Kentucky: University of Louisville, Kentucky State Data Center) 2004. Return to text.
20 CPE, Statewide Key Indicators, “College Graduates Remaining in Kentucky to Live and Work,” 26 Feb. 2007 http://cpe.ky.gov/planning/keyindicators/Statewide/; CPE, Brain Gain: Retaining Kentucky Graduates, Special Report 07.1. Return to text.
21 Education Cabinet, Research and Statistics Branch, Department for Workforce Investment, Office of Employment and Training, Kentucky Occupational Outlook to 2014 (Frankfort: Author, 2006) 26 Feb. 2007 http://www.workforcekentucky.ky.gov/admin/uploadedPublications/395_KY_OUTLOOK_2014.pdf. Return to text.
22 See Technical Appendix for a full account of the economic benefits attributable to each step. Return to text.