The Economic Impact of Guilford County Schools and the 2008 Bond Referendum

Dr. Andrew BrodCenter for Business and Economic ResearchBryan School of Business and EconomicsUniversity of North Carolina at GreensboroEmail: AndrewBrod@uncg.eduWeb: http://cber.uncg.edu

April 2008

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What is Economic Impact?

• An activity (e.g. hiring or spending) begets more activity.– Which begets more activity, which begets more…– A chain reaction of hiring or spending– Add up all the chain reactions: a multiplier effect

• Three components of economic impact:– Direct: The initial activity– Indirect: Business-to-business linkages– Induced: Business-to-household linkages– Add these up to get the total economic impact

What is Economic Impact?

• Economic impact can be measured in various ways:– Final demand (akin to gross sales revenue)– Value added (akin to GDP, GSP)– Employment (total FT + PT, not FTE)– I’ll focus on final demand and employment

• Needed for this study:– Regional economic data from IMPLAN– Specific data and information from GCS, focusing

on 2006-07 fiscal year

Sources of Economic Impact

• Three sources in this study:– GCS operations

• Subset: operations of academies– Improved educational outcomes since 2000

• Lower drop-out rate• Increase in college scholarships• Increase in AP credits earned

– School bonds• 2000 and 2003• Projection of 2008, if approved• Subset: contracts awarded to MWDBEs

• Fiscal impacts expressed in 2006 dollars

Impact Region

Indicator Value

Area (square miles) 650

Population 451,905

Employment 363,241

Number of Households 192,664

Total Personal Income (millions) $15,984

Average Income per Household $82,964

Guilford County, 2006

Source: 2006 IMPLAN data

Impact of GCS Operations

Institution Direct Indirect Induced Total

GCS 744.1 215.7 306.3 1,266.1

Academies 10.3 2.6 3.7 16.6

Final Demand ($ millions)

Institution Direct Indirect Induced Total

GCS 10,599 1,746 3,032 15,377

Academies 127 21 36 184

Employment (jobs)

Note: Implied multiplier for GCS ops = 1.70

Improved Educational Outcomes

• Lower Drop-Out Rates:– Drop-out rates not the same as the graduation

rates that have been in the news– Drop-outs have lower incomes, higher rates of

unemployment, pay less taxes, etc.– Rate in 2000 = 5.97%, rate in 2006 = 2.99%

• Decline of 2.98 percentage points• Implies 655 students did not drop out in 2006

– Economic impact via…• Reduced Medicaid costs• Reduced incarceration costs• Other mechanisms not considered in this study

Improved Educational Outcomes

• Lower Drop-Out Rates:– Implies total savings in 2006 of $784,445 in

Guilford County.– An implicit grant to county government, and

hence to taxpayers– Money freed up for other uses

• Increased scholarships to GCS seniors:– Total in 2000 = $31.0 million; total in 2006 =

$68.1 million– Increase of $37.2 million– Direct grant to households

Improved Educational Outcomes

• More AP credits earned– 1,650 AP exams earned scores of 3+ in 2000– 3,897 AP exams earned scores of 3+ in 2006

• Increase of 2,247 successful exams– 3 college credits– Weighted average of 3 college credits (based on

school types and GCS seniors’ choices) is $1,844– Total implied savings = $4.1 million in 2006– Implicit grant to households

Impact of Improved Outcomes

Outcome Direct Indirect Induced Total

Lower DO Rate 0. 8 -0.2 0.5 1.1

Higher Sch & AP 41.3 6.2 6.0 53.6

Final Demand ($ millions)

Outcome Direct Indirect Induced Total

Lower DO Rate 7 -4 7 9

Higher Sch & AP 279 41 71 391

Employment (jobs)

Comprehensive Impact of GCS

• Sum of…– Impact of operations– Impact of lower drop-out rate– Impact of increased scholarships & AP credits

• In 2006-07…– Final-demand impact of $1.32 billion– Employment impact of 15,777 jobs

• Compares to other recent CBER EIAs:– MCHS, 2003: $1.48 billion, 16,322 jobs– Furniture Mkt, 2003: $1.07 billion, 13,038 jobs– UNCG, 2006: $1.22 billion, 13,520 jobs

Impact of Bonds

• Bonds:– 2000: $200 million– 2003: $300 million– 2008: $412 million and $45 million (proposed)

• Impacts from construction, design, purchasing

• Contracts awarded to MWDBEs:– 11.3% of contracts awarded in 2000 and 2003

bonds; goal of 12.5% for 2008 bonds

• Details:– All-in-one-year assumption– Subtract out land purchases– Fiscal impacts in 2006 dollars

Impact of Bonds

Bond Direct Indirect Induced Total

2000 209.4 46.5 54.7 310.6

2003 316.9 72.9 86.7 476.5

2008: Total 428.7 103.7 124.4 656.8

2008: E.Guilford 42.9 10.7 12.9 66.5

Final Demand ($ millions)

Impact of Bonds

Bond Direct Indirect Induced Total

2000 1,822 450 541 2,813

2003 2,862 714 859 4,434

2008: Total 3,980 1,027 1,231 6,238

2008: E.Guilford 411 106 127 645

Employment (“job-years”)

Impact of Bonds: MWDBEs

Bond Direct Indirect Induced Total

2000 14.0 3.7 4.5 22.1

2003 34.0 9.0 10.8 53.8

2008: Total 47.3 12.7 15.3 75.4

2008: E.Guilford 21.5 5.8 7.0 34.3

Final Demand ($ millions)

Impact of Bonds: MWDBEs

Bond Direct Indirect Induced Total

2000 148 36 44 229

2003 357 89 107 554

2008: Total 490 126 152 769

2008: E.Guilford 223 58 69 349

Employment (“job-years”)

The Economic Impact of Guilford County Schools and the 2008 Bond Referendum

Dr. Andrew BrodCenter for Business and Economic ResearchBryan School of Business and EconomicsUniversity of North Carolina at GreensboroEmail: AndrewBrod@uncg.eduWeb: http://cber.uncg.edu

April 2008