From Lakewood’s Steve Wilson:

Should we spend every dollar the U.S. economy produces on education?

No, that would be silly.

So why did I pose that question?

To demonstrate that we all believe – ALL of us — that there are limits as to how much we, as a society, should spend on education.

Well, then, is there an OBJECTIVE method for determining the appropriate amount that should be spent on education?

In the case of general education, especially at the primary and secondary level, there are “soft benefits” above and beyond helping students prepare for work someday. That makes such a calculation more difficult.

But the purpose of the new CATI building is to help people develop skills in order to get better paying jobs than they could otherwise get.

That makes it easier to determine whether the project makes sense from a public policy perspective: the project makes senses IF it results in higher income sufficient to repay the cost to taxpayers.

So, how much would students using this project have to earn in order to justify the cost?

Let’s consider just what the STATE is paying for: their portion of the cost of the building.

Will state income taxes rise by an amount sufficient to justify the cost?

(Ignore the maintenance and staff costs because these costs will not be borne by the state government, but by students and local property taxes.)

The state is providing $16 million.

A reasonable estimate of the useful life of the facility before it’s worn out or obsolete is 20 years.

At a discount rate of 3%, the effective annual cost of $16 million is a little under $1.1 million.

Total cost over 20 years, about $21.5 million.

How much marginal income that would need to be generated in order to justify the project?

(I emphasize the word “marginal” because people who take classes at the new building would not earn zero if they didn’t take classes there. They’d earn something. It’s only the additional income, the marginal income, that matters to the calculation.)

The income tax rate in Illinois a flat 4.95% (at this moment).

So, take the total cost and divided by the tax rate, and the MARGINAL additional income needed to justify the project is about $435 million.

That is, $435 million times a tax rate of 4.95% is about $21.5 million.

Now, that’s spread out over 30 years for each student because students will probably work for at least 30 years.

MCC only has about 2,100 full time students, and a bit under 7,000 students total.

How many students are going to take full advantage of this new building?

7,000? No.

2,100? No.

Probably at most a 100 or 200 per year.

If 100 students graduate each year for the next 20 years (the life of the building), and each student works for 30 years, then each student would need to earn an additional $7,200 per year over and above what they would have earned doing something else with two years of community college education or not going to community college at all.

If 200 students graduate per year, and they each earn an additional $3,600 per year, then the project is break even from a public policy perspective.

Based on figures I see for technical jobs, I think it’s highly likely that students graduating from technical vocation programs such as MCC is proposing are likely to earn this much more per year or more versus students with only a high school education or students who get a lot of other community college degrees.

So, first pass, it looks like the project isn’t a complete boondoggle.

This is, the determination the board should have made before “enthusiastically” endorsing it.

I have my doubts any such reasoning or calculations were made by the board or the administration.

Of course, that still doesn’t mean the buildings should actually cost $536 per square foot.

At a more reasonable cost, the benefit to the taxpayers could be sizeable.