An economic model of the effects of colleges on their communities was developed. The Texas Input-Output Model was modified into a higher education budgetary model. Included were the positive benefits of tax savings and estimates of the net effect on various communities in which state-supported colleges and universities are located. The output measures were sales and employment. While the model was developed to illustrate the statewide effects of budgetary changes for all Texas colleges and universities, a fictitious urban and rural university were used for illustration. Equations for the budgetary input-output model cover: the number of people employed in the counties in the previous year, fall enrollment at each campus, budgeted appropriations for the previous fiscal year, and the estimated effects of the budgets on local economies. For both universities, employment and enrollment projections and retail sales estimates take into account the following conditions: no change in the previous budget, 10% reduction in the budget, and 5% increase in the budget. Several tables are provided. (SW)