Investments in Education and Infrastructure Correlate to State Economic Competitiveness

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 Much of the news this week coming out of Texas focused on the failure of the state government to adequately invest in the energy and utility infrastructure. It is the same model that we have tracked in states like Kansas where large cuts to state services were made to keep taxes low.

I could not help but thinking how obvious a failure to invest in public infrastructure manifests itself in many states that worship at the alter of the Laffer curve and supply side economics. You see it very plainly in deteriorating roads, bridge collapses, and a failed utility system during a winter storm.

https://kypolicy.org/impact-of-cuts-to-public-higher-education-in-kentucky-continue-as-students-begin-classes/

But what about education. The failure to invest in P-12 and higher education will not be as immediately evident. Citizens of states that consistently fall behind and fail to invest in their human capital will not completely see this failure until it is too late.

That is why it is so alarming to see the news last week from the Kentucky Council on Postsecondary Education about the decline in state higher education enrollment. The decline of students nationally and in Kentucky completing the Free Application for Financial Aid (FAFSA) has dropped even more sharply, signaling the potential for a larger decline in 2021.

These trends on top of a 35 percent cut to higher education since 2008 means that Kentucky's human capital may become the educational parallel to the Texas power grid. It is already showing up in Kentucky's declining economic competitiveness. In a recent study of the economic health of all 50 states by Comen (2019) prior to the pandemic, Kentucky ranked 44th with the 12th lowest GDP and 13th highest unemployment rate. Also unsurprising is the corollary of bachelor degree attainment. Kentucky ranked 45th in the percentage of adults with at least a bachelor's degree. In fact, the best predictor of the competitiveness of a state's economy is college attainment.

Research is also very clear about the return on investment for education funding. The states which have made the greatest investment in building the capacity of their public-schools, colleges and universities to meet the educational needs of all citizens, from the poorest on up, have experienced stronger economic growth than states that did not. Indeed, the high-investing states also had larger increases in worker wages over the same time period, as well as a statistically meaningful advantage in state level GDP growth.

As it turns out, investment in P-12 education, higher education and public infrastructure are the only policy decisions at the state level which have a statistically meaningful correlation to economic outcomes, according to research conducted by the Center for Tax and Budget Accountability. 

Thanks to a decade of mediocre investment in P-12 and higher education, Kentucky's competitiveness has moved from the middle of the pack to once again saying "thank God for Mississippi."  

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