The purpose of this study was to determine the local economic impact of alternative state budget reductions for Texas community colleges by investigating the income losses to the Metropolitan Statistical Areas (MSAs) if state appropriations were reduced by 10, 15, and 20 percent. The objective of this study was achieved through an economic analysis of the local economy of selected MSAs and by computing the income size which was generated by selected colleges. Eight community colleges located in eight MSAs participated by answering mailed questionnaires. The model of Direct Economic Impact was applied to describe the colleges' economic impact. The model was composed of college expenditures, employee expenditures, student expenditures, and the economic multiplier. The study revealed that the selected community colleges were responsible for creating new jobs and increasing the income of the local economies. These eight colleges were responsible for increasing the income of the local economies by $294,945,560 and for creating 5,129 jobs. Reduction in state appropriations to the selected community colleges will reduce the income they produce. A state appropriation cut of 10 percent will result in a loss to the local economy of $6,153,951. A 15 percent reduction in state appropriations will cause the local economy to lose $9,230,943. A 20 percent reduction in state appropriations will reduce the local economic income by $12,307,920.