Economic Review of College Tuition Subsidy Proposals

Phoenix (September 19) – The Arizona Chamber Foundation released a Policy Review today that examines the economic and public policy implications of providing subsidized community college and university tuition in Arizona.

According to the paper, which was prepared by the Rounds Consulting Group, a “free college” model would result in $2.6 billion in additional state costs that would need to be offset by an equivalent increase in taxes. Such a dramatic increase in taxes would have major implications for the overall economy, including job losses and weaker overall economic growth.

The idea of expanding access to an affordable college education has become more prominent in American politics. The assessment concludes the following:

• Changes in public policy related to tuition costs will be more likely to produce a positive economic return if designed as part of a broader-based, higher education package. This could include changes to state versus student cost-sharing ratios and enhancement of the linkage between higher education and workforce development efforts.
• Tuition policies need to be focused on achieving measurable outcomes. Generic proposals simply to cover the full cost of tuition will be costly and inefficient. Any university or community college investment project should be designed and evaluated as part of a broader economic development vision for jobs and the workforce.
• It is clear the state’s higher education infrastructure is a core component to building the economy and should be adequately supported. However, redirecting limited resources from the system’s more strategic programs for use on a free tuition program will not yield economic benefits.

This paper is the first in a series exploring topics relevant to expanding Arizona’s footprint as a destination state for employers, innovators, and entrepreneurs. Additional Arizona Chamber Foundation research will assess more refined approaches to workforce development; learn from this country’s top innovators why Arizona is a top destination for tech companies and workers alike; and illuminate a path to Tier I Tech State status.

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About the Arizona Chamber Foundation
The Arizona Chamber Foundation is a non-profit, objective educational and research foundation. We are committed to a non-partisan, research-driven approach that analyzes the issues impacting Arizona’s economy. It houses the A for Arizona and Chamber Business News initiatives. Find out more at www.azchamberfoundation.org.