How higher education can spur economic development

On Jan. 30 Tennessee Governor Haslam announced his plan to make community college free for all Tennessee adults. Following in the footsteps of Tennessee Promise, a 2015 law that created free higher education for high-school graduates, the Reconnect Act would make Tennessee the first US state to offer tuition-free higher education to everyone. So what does this mean for Economic Development? Will the increase of skilled workers lead to job creation in Tennessee? Learn more by reading our exploration and analysis of Tennessee’s free college movement.

Currently, Tennessee needs 871,000 postsecondary degrees or certificates to reach the Governor’s goal of having 55 percent of Tennesseans hold such a degree by 2025. To accomplish this goal, the Governor had previously championed the Tennessee Promise law which offered tuition-free courses to graduating high school students. While it’s still early in the Tennessee Promise story, the results so far have been seen as extremely encouraging. Since the program started, more than 33,000 students have enrolled in college as a result of Tennessee Promise, and of the students who began in fall 2015, 63 percent are still enrolled. These results have encouraged Governor Haslam to announce further education plans during his State of the State address this last Jan. 30.

During his speech the Governor mentioned a few highlights which prompted him to expand the educational offering to more Tennesseans, stating, “at a time when the rest of the nation is wondering what to do about student loans, Tennessee has seen a 17 percent decrease in the number of students taking out loans.” Additionally, the Governor noted, “I am proposing that Tennessee become the first state in the nation to offer all adults access to community college free of tuition and fees. Just like the Tennessee Promise, Tennessee Reconnect will provide last-dollar scholarships for adult learners to attend one of our community colleges for free – and at no cost to the state’s General Fund.”

With the Reconnect Act, Tennessee would be the first in the nation to offer all citizens – both high school students and adults – access to a degree or certificate free of tuition and fees. No caps. No first come, first served. As the Reconnect Act works its way through the legislature, economic leaders in Tennessee are hoping businesses will recognize the value the state is making in growing its’ workforce.

Reconnect Act Details

To be eligible for the program, students must:

    1. not already have an associate’s or bachelor’s degree,
    2. have been a Tennessee resident for at least one year prior to applying to the program,
    3. be considered an independent student,
    4. be admitted to an eligible institution, which are any of Tennessee’s 13 public community colleges, and
    5. enroll in a degree or certificate program for at least six semester hours beginning in the 2018-19 school year.

To maintain the grant, students must continue enrollment in classes that lead to an associate degree or certificate and maintain a 2.0 GPA. The program will be paid for by the state’s lottery system.

Skilled Workforce and Economic Development

In 2014, Tennessee was the only state with a wide-reaching tuition-free program for recent high school graduates. Since then, several states — including Oregon, New York and Rhode Island — have followed that model. Tennessee’s new role as an education trendsetter should help shape higher education policy and workforce training for years as students move through the pipeline, exposing the strengths and weaknesses of the increasingly popular model.

Although the Reconnect Act represents a bold shift for the state’s efforts to expand college access, its true economic impact will not be seen until these students begin to enter the workforce. As many site selectors know, a skilled workforce is often the biggest challenge faced when a company is looking to expand its operations. If Tennessee can show this new program is producing workers with the skill sets companies need in order to fill advanced manufacturing jobs and other jobs of the future, then Tennessee should jump to the front of the line for new investment and job creation decisions.

Workforce and the Site Location Decision

It is evident that Tennessee wants to be a workforce leader. The Governor has recognized an area in the Volunteer state which can help bolster economic development. By investing in their workforce, leaders are expecting to improve their chances to win new investments and jobs. For companies considering any type of expansion or investment, Tennessee is placing its workers at the top of the human capital list.

Nevertheless, knowing how the Volunteer state stacks up to other state tax schemes is critical to the site selection process. The LBMC/McGuire Sponsel team’s planning services focus on identifying key value drivers, comprehensive site and cost comparison, multi-state incentive program education and ongoing opportunity assessment.

If your company is investing, expanding or adding jobs – tax incentives in Tennessee and other market impacts could significantly affect your decision process. To schedule your incentive planning session, contact us.

Douglass DaltonGuest blog from the professionals of McGuire Sponsel, an LBMC strategic partner delivering specialized tax and advisory solutions. They approach their work as trusted resources to CPAs, enhancing those important annuity relationships through innovative tax strategies.