Photo: Study Reveals Positive and Negative Fiscal Effects of Maryland DREAM Act
A new study of the proposed Maryland DREAM Act from the Maryland Institute for Policy Analysis & Research found it would have both fiscal costs and benefits to Maryland.
The Maryland DREAM Act allows undocumented immigrants who graduate from Maryland high schools and meet certain additional conditions to pay in-county/in-state tuition at Maryland community colleges and public universities. Specifically, under the DREAM Act, eligible students who begin their higher education at a Maryland public community college pay the in-county tuition rate if they are residents of the service area of the community college that they attend. After completing an associate’s degree, or 60 credits (two years full-time study) at a community college, students can then continue their higher education at a Maryland public university or college at in-state tuition rates.
The DREAM Act is likely to have a variety of economic impacts upon those who take advantage of it, as well as on federal, state and local governments and society as a whole.
- Private costs of the DREAM Act to students include the tuition and fees paid by those who would not have gone to school without the DREAM Act, plus the earnings foregone because these students are in school and not working.
- Private benefits to students from the DREAM Act include the higher post-tax earnings, fringe benefits, better job satisfaction and better health that result from more education.
- Fiscal benefits of the DREAM Act include the increased income tax revenue, increased sales tax revenue, and increased property tax revenue that occur because more-educated individuals earn higher incomes.
- Because more educated individuals are less likely to commit crimes and be incarcerated, are less likely to receive income support (welfare), and are less likely to receive Medicare or other government health care subsidies, fiscal benefits should also include the reduction in public spending in these areas.
What are the total net economic impacts of the DREAM Act?
- For most categories of students who take advantage of the Dream Act, the estimated total net fiscal plus private benefits are not only positive but large. The estimated total net benefits to the economy of each annual cohort of students who take advantage of the Dream Act are approximately $66 million in 2011 dollars.
What are the fiscal costs and benefits to the state, county and federal governments of the DREAM Act?
- For students who obtain more education because of the DREAM Act, there are net fiscal benefits for all levels of government (state, local and federal) as well as private net benefits. For students who benefit from the DREAM Act but do not obtain more education, costs shift among the student, and county, state and federal governments, leading to positive net private benefits as well as positive net total (fiscal plus private) benefits, but negative net fiscal impacts for the state and local governments combined. The total fiscal costs and benefits of the DREAM Act will depend on the number of students who obtain more education because of the Dream Act relative to those who benefit but do not obtain more education because of the DREAM Act.
- For each annual cohort of students who benefit from the DREAM Act, the estimated total fiscal costs to governments of additional schooling induced by the DREAM Act are approximately $3.6 million for the Maryland state government, $3.6 million for county governments and $200,000 for the federal government. However, the initial costs of the investment in education will be more than offset by increased tax revenues and lower government spending on incarceration and other government programs that result from a more educated citizenry. Consequently, the total net fiscal benefits of the DREAM Act for each annual cohort of students are estimated to be close to $24.6 million. Of this $24.6 million, approximately $6.2 million will accrue to the State government of Maryland and to Maryland county governments and $18.4 million will accrue to the federal government. While these estimates are based on a number of parameters that are imprecisely estimated, the basic result is robust and remains qualitatively unchanged when underlying assumptions are varied.
By increasing educational attainment, the Dream Act will increase lifetime earnings of beneficiaries, as well as tax revenues. Our estimates indicate that the net economic impacts of the Dream Act for the first group are positive for each level of government as well as for private individuals. In contrast, although the net private benefits and the total net benefits for the second group are also positive, net fiscal impacts for the state and local governments combined are negative. Our estimates of positive net benefits for students who obtain more education because of the Dream Act are expected. It simply means that education is a good investment both for the student and for the economy.