By Anthony Lee
The COVID-19 pandemic has presented distinct challenges for institutions of higher education in the United States. Although most colleges and universities are welcoming students for the 2020-2021 academic year, each has taken an individual approach to the opening process. According to The Chronicle of Higher Education, which has tracked more than 1250 colleges’ proposals, 50 percent plan for in-person, 34 percent for hybrid, and 12 percent for online. For college towns, which depend on the economic activity generated by their local institutions, the decisions to implement hybrid and online models will have profound implications for residents.
New England (i.e. Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island, and Vermont) is particularly vulnerable because of the large number of regional colleges and universities that have pursued hybrid or online models. The Chronicle of Higher Education’s raw data details that 67 out of 122 New England institutions that have reported their fall opening plans plan for hybrid or online. Furthermore, the region is unique in its dependence on higher education for employment (3.4 percent of total employment compared to 2.5 percent nationwide, according to the Federal Reserve of Boston). Therefore, the assessment of the potential economic impact of institutions’ opening plans on New England municipalities is crucial.
While the extant literature is sparse, it strongly suggests that all New England college towns will experience significantly decreased economic activity and increased unemployment. For example, the Boston Planning & Development Agency, Research Division reports that in 2019, higher education contributed four percent of Boston’s Gross City Product (4.6 billion dollars) via labor income, business taxes, and capital income; additional economic benefits occurred in employment, research funding, workforce development, tax contributions, and real estate development. However, the COVID-19 pandemic has negatively impacted several sectors. In particular, employment has decreased as colleges and universities have furloughed and released workers to minimize their economic losses. Given the number of institutions in Boston that have committed to hybrid or online modes of learning, more employees will likely follow. This contraction in higher education’s labor market is significant as colleges and universities employ 34000 people, or 8 percent of total payroll employment, in Boston. Furthermore, it is probable that real estate development by institutions in Boston will halt because of budget cuts, and the ramifications of these decisions will inevitably fall upon the real estate and construction industries. Just considering these two sectors, it is easy to envision the economic downturn Boston has experienced and will continue to experience as the COVID-19 pandemic progresses.
However, some New England college towns will suffer more than others; research suggests that the crisis will disproportionately affect municipalities housing smaller institutions. Larger cities, such as Boston, have additional industries (e.g. healthcare, finance, etc.) to support the local economy; however, for some smaller New England municipalities, the major employer is the local institution of higher education. In these heavily institution-dependent towns and cities, the Federal Reserve of Boston reports that 45 percent of wages and 38 percent of jobs come directly from the local colleges and universities. This statistic does not include the secondary economic impact of student-driven consumption, which sustains local businesses; social events; and town utility bills paid by the institution. This ripple effect that local colleges and universities have is as important as the employment they provide. Consider Amherst, Massachusetts, and Orono, Maine. With the cancellation of commencement this year, Amherst lost 3 million dollars in revenue, and Gabrielle Gould, executive director at the Amherst Business Improvement District, estimates that 30 percent of businesses will close within the year. Meanwhile, in Orono, Maine, the University of Maine pays 4.5 million dollars of the town’s 10 million dollar budget, providing necessary public utilities like emergency medical, firefighting, sewer, and other services.
Of the smaller institutions of higher education, the most vulnerable are those that face the looming possibility of financial collapse and closure. The Federal Reserve of Boston reports that of the 57 towns and cities that depend heavily on higher education for direct employment (i.e. at least 10 percent), 19 contain a higher-risk institution; Maine and Massachusetts lead the New England states with 6 and 5, respectively. With fewer than half of New England schools having endowments worth more than half of their annual expenses, declining enrollment trends, and significantly decreased projected state tax revenue, college towns with higher-risk institutions and public universities may feel the economic blow first.
The literature does have several issues. First, no studies exist that predict institutional opening plans’ economic impact on New England institutions of higher education due to COVID-19. Given that this pandemic continues to develop by the day, it is unlikely that an accurate model can be created at this time. Second, and more importantly, the literature does not address possible mitigation measures of this economic fallout. To date, the federal government has provided $14 billion in funds to higher education under the CARES Act, but the American Council of Education has requested an additional $46.6 billion in emergency aid in the next stimulus package. However, those funds may arrive, if they get approved at all, too late for some New England college towns. Because of the unprecedented nature of this crisis, even compared to the Great Recession, there is no blueprint for municipalities in case their local institutions fail. Only time will tell the true economic damage of COVID-19 to New England college towns and the measures that did or did not succeed in resuscitating them.
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