Forecasters predict the economy will grow significantly in the latter half of 2021 as the U.S. continues its recovery from the COVID-19 pandemic and recession. However, if the coming recovery resembles those in the wake of the early-2000s recession and the Great Recession, it will likely be spatially uneven, with some places making a quick recovery while other communities, both urban and rural, face continued economic distress.
This economic divergence has had tremendous economic and social costs for the communities that get left behind. Millions of workers in these places face limited prospects for finding well-paying, accessible work, damaging their quality of life. But simply giving up on distressed communities and encouraging more workers to migrate to high-growth metro areas is not the solution, as new evidence suggests that severe regional imbalance may not only hurt the places left behind, but also negatively impact the nation’s aggregate economic growth.
As federal policymakers consider ideas to provide transformative investments to states and metropolitan areas, they should do more to engage with anchor institutions in economically distressed communities. In many distressed places, anchor institutions—such as higher education institutions—can be important assets for supporting local job creation, housing, and other forms of economic and community development.
To support distressed communities, this report lays out the case for federal funding of regional public universities, with efforts aimed at ameliorating the nation’s regional divides.
This report proposes providing federal grants of between $25 million and $50 million, paid over five years, to regional public universities situated in distressed communities to support those schools’ economic and community development missions.
Regional public universities (RPUs) are important anchor institutions to promote economic and community development for distressed communities, and are a class of institution that stands to benefit from substantially more federal support. RPUs provide a variety of advantages for communities: Places with an RPU historically have had faster employment growth and higher per capita income. RPUs are also important sources of human capital, driving in-migration to communities and supporting a workforce with significantly higher bachelor’s degree attainment rates. RPUs can even support economic resilience during downturns.
To leverage more universities as anchor institutions for distressed communities, the federal government should establish a new distressed-communities-serving designation for regional public universities. The program would be open to four-year public universities that are not currently “Research 1” (R1) universities (those that conduct the highest levels of research) or universities designated as land-grant institutions under the Morrill Act of 1862.
To provide an approximate list of which schools could be designated as “distressed-community-serving,” this analysis uses Census Bureau median family income data. For schools situated in metropolitan or micropolitan statistical areas (generally abbreviated as MSAs), this analysis uses ZIP-code-level family income data, while for non-MSA schools it uses county-level data..
For schools situated in states where the median family income is above the national median family income, eligibility is based on how far the local median family income is below the state median family income, to avoid penalizing schools in high-cost states. For schools in states where the median family income is below the national median family income, eligibility is based on how far the local median family income is below the national median family income, to be more inclusive of schools in low-income states. The cutoff used to qualify as “distressed” is a median family income 30% below the relevant threshold.
This methodology identifies 141 RPUs that are situated in distressed communities, spread across 108 MSAs in 34 different states and Puerto Rico (see Figure 1).
In addition, this analysis proposes that public colleges that are situated within the same county as Native American tribal land should be made eligible. Due to the extensive Native American land expropriations that the U.S. government used to establish its public higher education system, ensuring that public universities support Native American economic and educational development should be a core obligation of the federal government. Doing so would increase the number of eligible schools beyond 141.
To fund distressed-communities-serving colleges and universities, Congress should leverage a two-step process to first certify and then fund schools. First, the federal government would automatically designate schools as a distressed-community-serving institutions if they are located within a distressed community or in the same county as Native American tribal land. Once they receive the designation, schools would be notified and be given the option to accept planning funding to design projects to support economic and community development in the distressed communities they serve. Planning grants could be one- or two-year grants worth up to $100,000 per year to help universities defray the cost of putting together a grant implementation plan, either by themselves or in partnership with other RPUs in the same state or MSA.
Once the federal government approves an institution or consortium of institutions’ implementation plan, they would be eligible to receive implementation grants to enact their plan. Implementation grants would be more significant grants that fund the investment being made in the distressed community. These grants could be between $25 million and $50 million per institution, paid out over a project period of five years.
Universities could leverage grants for a variety of different types of projects. While either the Department of Education or the Economic Development Administration would have final discretion on what types of project should be eligible, examples could include:
- Physical reinvestment in distressed communities
- Entrepreneur and business development services, with a focus on underrepresented groups
- Enhancing job creation and connecting local residents to employment opportunities
- Investing in essential digital infrastructure such as broadband
- Programs to improve university and community capacity to address regional public health or economic challenges
- Efforts to improve postsecondary enrollment rates for elementary and secondary school students in distressed communities
- Community-relevant research
Schools would not need to use the entirety of their implementation grant funding for just one use. For example, they could leverage part of it to support broadband expansion, while using another portion to scale up local business development.
» Read more about grant design on page 14 of the report.
Grants to distressed-community-serving universities would have positive employment impacts for those communities and can serve as a base to further build around.
While job creation varies by how the money is spent, each type of expenditure would have corresponding downstream effects. For example, establishing widespread internet coverage in an area will create a variety of job, educational, and skill development opportunities that wouldn’t otherwise exist.
These investments could also help bolster state and local fiscal well-being in the form of increased tax revenues.
Based on initial estimates, a $50 million investment could generate between $2.9 million and $12.4 million in federal income tax collections, and between $1.1 million and $4.7 million in state income tax collections.
» Read more about potential fiscal and economic impacts on page 22 of the report.
Policy decisions in the coming year could have substantial impacts on the trajectory of both the national recovery and local well-being in distressed communities for the next decade or more. It is crucial that policymakers learn from the mistakes of the last spatially uneven recovery—a recovery that also saw a substantial weakening of investment in public higher education. A concerted federal effort to support regional public universities that serve distressed communities can help to both stem some of the higher education disinvestment that has happened on the state level while also promoting a more spatially and racially equitable recovery.
Eli Byerly Duke provided great research assistance on fiscal and economic analysis, and Yang You provided helpful data mapping assistance.