To Reduce Income Inequality and Boost Economic Growth, Make sure every Student has an Opportunity to Attend College
Rising levels of income inequality are acting as a drag on the U.S. economy, but we can counter the economic harm by expanding opportunities to attend college, according to a new report from Standard & Poor’s, a financial services company.
Here’s the crux of the report, in a sentence:
Our review of the data, as well as a wealth of research on this matter, leads us to conclude that the current level of income inequality in the U.S. is dampening GDP growth, at a time when the world’s biggest economy is struggling to recover from the Great Recession and the government is in need of funds to support an aging population.
Pretty clear, right? Prominent policymakers, including President Obama, have warned time and again that high levels of income inequality are slowing economic growth. This report adds something new to the conversation in that it represents the viewpoint of a private sector company, and could be an indication that the business community is starting to view income inequality as a problem. Read more
Many college students graduating this month have heavy loads of student loan debt, a burden that may be weighing down the entire economy. Students who must commit a large part of their incomes to student loan repayments are holding off on making big purchases, reducing the overall level of economic activity.
More than three-quarter of a million Wisconsin residents have federal student loan debt, according to the U.S. Federal Reserve System. The average debt level for Wisconsin residents is about $22,000.
Student loan payments represent a great deal of money that new graduates are devoting towards paying down debt, rather than making consumer purchases that can boost the economy. More than one in three Wisconsin residents with 4-year or advanced degrees has student debt, according to a web survey of 2,600 individuals, undertaken by One Wisconsin Now. The loan repayments can take a big bite out of graduates’ incomes: the average monthly student loan bill was $350 for Wisconsin residents with a 4-year degree, and $448 for those with advanced degrees, according to OWN. Read more
Tuition at Wisconsin public colleges and universities has increased by 21% since 2008, according to a new report from a national policy organization. Rising tuition levels make it harder for students to afford to go to college and harder for Wisconsin to develop the skilled workforces we need to attract businesses and compete for the jobs of the future.
The increase in tuition means Wisconsin students at public colleges and universities paid $1,530 more for one year of tuition in 2014 than they would have in 2008, even after adjusting for the rising cost of living. If we multiply that amount by four, then we find that tuition costs for a four-year degree rose by $6,120 between 2008 and 2014.
Tuition is going up because Wisconsin has reduced its investment in higher education. Since 2008, Wisconsin has decreased support for public higher education by 22% per student – a cut that works out to $1,401 per student. Read more
States can raise wages and build a strong foundation for economic success by making investments in education, particularly higher education, according to a new report from the Economic Policy Institute.
The report, “A Well-Educated Workforce is Key to State Prosperity,” makes the following points:
- High-wage states have a well-educated workforce;
- Expanding access to high-quality education strengthens economic opportunity for residents and boosts the state’s overall economy;
- Trying to outdo other states in cutting taxes makes it harder for states to invest in education; and
- Investing in education is good for state budgets in the long-run, since highly-paid workers contribute more in taxes.
The conclusions of this report might seem like common sense to many people in Wisconsin. After all, education has long been an engine of our state’s economic growth. We have depended on a well‑educated workforce, shaped by excellent public schools, to lay the foundation for our prosperity. Read more
The structural deficit that the state will face in the 2015-17 isn’t nearly as bad as some others created by state policymakers and/or unanticipated slowdowns in revenue. However, the combination of that budget hole and promises some lawmakers have made to keep cutting taxes could result in very austere times ahead for education and other important state investments.
The Joint Finance Committee (JFC) meets again this week on Thursday, May 23, starting at 10:00 in Room 412 E. Some of the major areas coming up on Thursday are the Department of Justice, DOT, and the UW System. (It appears that the committee will not meet on Friday, May 24.)
A full list of the items on the May 23 agenda can be found here, with links to each of the papers. The outline below includes links to a few of the many Legislative Fiscal Bureau papers:
- Internet Crimes Against Children Taskforce (Paper #392)
- GPS Tracking Grant Program for Individuals Subject to Domestic Abuse or Harassment Restraining Orders or Injunctions (Paper #415)
- Transfer the Office of Justice Assistance (Paper #405)
- DNA Collection at Arrest and the DNA Analysis Surcharge (Paper #410)
- Mass Transit Operating Assistance — Convert Funding to GPR and Mass Transit Funding Level (Paper #640)
- Major Highway Development Funding (Paper #652)
- State Highway Maintenance — Routine Maintenance Funding and Program Restructuring and Traffic Signal and Intelligent Transportation System Installation, Replacement, and Rehabilitation (Paper #657)
- PR Appropriation Balances (Paper #675)
- GPR Funding Increase and Compensation Plans (Paper #676)
- Incentive Grants (Paper #677)
Jon Peacock Read more
Many students graduating from the University of Wisconsin this week leave campus with potentially crushing levels of student loans.
Nearly three-quarters of in-state students attending Wisconsin’s public universities take out loans, totaling an average of more than $27,000 of debt, according to the most recent figures. The average amount for University of Wisconsin students taking on debt has climbed 35 percent since 2002, even after being adjusted for inflation.
That increase in debt for new UW graduates is caused in part by tuition hikes and decreases in state support for the state’s university system. The state budget passed last year increases in-state tuition for undergraduates by 5.5 percent for two years in a row, and freezes financial aid.
But the tuition increases in the most recent budget are nothing new. Over the last 20 years, tuition at UW-Madison has risen at an average rate of 4.9 percent per year, not counting increases due to inflation. Read more
Seldom has there been stronger public support for the notion that higher education is a critically important route for achieving the American Dream. A recent study by the Pew Center on the States reports that Americans believe access to a quality education is the most important way the government can help people get ahead.
Despite that public support, the future of federal subsidies for student loans is at risk, and the student loan interest rate could soon double to 6.8 percent – compounding the problems caused by state-level cuts in funding for higher education and student financial aid. Although both parties in Congress have said they want to maintain the lower interest rate, they remain very far apart on how to find the $6 billion annually to continue the loan subsidies.
The Joint Finance Committee (JFC) met yesterday and voted 12-4, along party lines, to approve $123 million of cuts from agency budgets recommended in late December by the Administration (DOA). Unfortunately, this is just the latest chapter in an ongoing series of cuts recommended by the Walker Administration and then okayed by the JFC, without public debate or a vote in the full Legislature.
As we noted in a previous blog post, the funding that is being cut and lapsed to the General Fund adversely affects a wide range of agencies, and some of the cuts are shifted onto local governments – such as the substantial hit to county juvenile justice programs through the cut in Youth Aids. Also lapsed to the General Fund is the federal performance bonus funding awarded to the state for the success of BadgerCare. That $24.5 million will now be used to offset the General Fund deficit, rather than being used to help close the Medicaid shortfall, and thereby avoid some of the proposed policy changes that are expected to sharply reduce participation in BadgerCare. Read more
University of Wisconsin students will take longer to graduate, run up more debt, and have less access to high-need programs, University officials say. The reason: A state budget that requires the UW System to shoulder a disproportionately large share of the cuts.
The state’s two-year budget that passed last summer cut state support for the UW System by about nine percent, much larger than cuts made to other areas of the budget. In comparison, state support for prisons and other correctional services was cut by only about two percent. The state budget also paved the way for a 5.5 percent UW System tuition increase in each of the next two years, and froze the amount of tuition assistance available.
Now the state is once again making deep cuts to the UW System. The budget directed the state to find new, unspecified savings (also called funding lapses), on top of the specific cuts included in the budget. Read more