Expanded Admissions to Florida International University

The total long-run cost of admission to Florida International University is determined both by federal expenditures on schooling and by the long-run impact of FIU admission on earnings, which impacts government revenue via high taxes and reduced transfers.

Zimmerman (2014) provides estimates of the total level of educational expenditures induced by an additional FIU enrollment. The author finds that admission to FIU increases total expenditures in the Florida State University System but decreases total expenditures in the Florida Community College System. (Some students who enroll in FIU would have enrolled in community college if FIU hadn’t admitted them.) Costs paid by the government are calculated by taking the increase in total expenditures and netting out the private contributions made by enrolled students. Zimmerman (2014) draws upon figures from the Delta Cost Project for estimates of yearly schooling expenditures and student contributions toward schooling expenses. All of these estimates are then scaled by the change in the relative probability of enrollment at FIU versus other schools as a result of the admission of a student to FIU. Hendren and Sprung-Keyser (2020) discount these expenditures over four years and report the total public cost per admitted student is $2,617.

Hendren and Sprung-Keyser (2020) calculate the changes in taxes paid and transfers received due to admission at FIU. The willingness to pay section below walks through in detail how they use estimates from Zimmerman (2014) to calculate the lifetime earnings gains from admission. They then apply a tax and transfer rate to determine the impact of those earnings on government revenue. The tax and transfer rate is based on estimates from the Congressional Budget Office. They find that the $142,757 lifetime earnings impact from FIU enrollment results in a fiscal externality of $27,062. When combined with the educational expenditures, that results in $24,44 net windfall for the government.

Combining these estimates, Hendren and Sprung-Keyser (2020) obtain an MVPF of \infty, with a confidence interval of (\infty,\infty). They also consider a specification where admission to FIU is valued at the cost of the transfer rather than based on the change in long-term earnings. This conservative method for calculating willingness to pay ignores any effect from increases in earnings but also results in a 95% confidence interval of (\infty,\infty) .