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Regional Economic Impacts Of Idaho State Essay

, Research Paper


The Regional Economic Impacts


of


Idaho State University, 1996


Dr. Richard Bowen, President of Idaho State University, requested the Center for


Business Research to conduct a study of the impact of the University on Idaho,


with particular emphasis on its regional impacts upon the Pocatello area. This


publication reports the findings and results of that effort, which was begun in


the fall of 1997.


This report is a follow-up to, and a complete revision of, a previous study


conducted in 1988 (”A Report to the President of Idaho State University: The


Impact of University-related Expenditures on Idaho’s Economy, 1986-87). For


several reasons, the direct comparison of the findings of the two reports is not


advised.


Specifically, the present report utilizes multipliers refined and updated by the


Regional Science Research Institute, while the previous report relied upon


Input-Output estimates generated by the US Bureau of Economic Analysis, Regional


Input-output Measurement System (RIMS). Secondly, the focus and emphasis of the


present report is on the Pocatello area economy, while the 1988 study emphasized


state level impacts. Third, the present report attempts to discount those


impacts generated by permanent area residents, attempts to estimate a “return on


investment” for the State of Idaho, and makes other refinements or improvements


to the 1988 approach.


Paul R. Zelus, Ph.D., directed the study, and was ably assisted first by Nancy


L. Kelly and then Walter Bulawa, Ph.D., Research Associates of the Center for


Business Research at Idaho State University. Acknowledgement is also extended to


the many campus officials who provided the often tedious and detailed


information needed to conduct the study. The many faculty, staff, and students


who responded to expenditure surveys are acknowledged for the critical


information they provided.


This project was aided immeasurably by the shared experiences of researchers


from Boise State University, Northern Arizona University and the University of


Virginia. In that order, I acknowledge the helpful comments and advice of Dr.


Charles Skoro, Dr. Jerry Conover and Dr. John Knapp.


Paul R. Zelus, Ph.D.


Project Director


Table of Contents


Executive Summari


Institutional Expenses


Faculty and Staff Spending


Student Expenditures


Visitor Expenditures


Impact Assessment


Executive Summary


This study provides estimates of the economic impact of Idaho State University


on the regional economy of the Pocatello area. During the 1996 academic year


Idaho State University employed 657 full and part time faculty and 1,156 full


and part time staff employees, with wages and benefits totaling $47 million. It


served 12,245 students enrolled in a variety of courses and programs of study.


The University operated on an annual budget of $149 million, of which $72


million was provided by the State of Idaho in the form of appropriations. Nearly


$45 million of its revenue represents federal scholarship and student


assistance, while another $22 million is received through student tuition and


fees. The remainder of revenue comes from private and miscellaneous sources.


Direct local expenditures on the part of the university and its faculty/staff,


students and out-of-area visitors exceeded $215 million.


Institutional expenditures within the Pocatello economy exceeded $23 million


for purchases of professional services ($5.4 million), communication and


utility services ($1.9 million), materials, supplies and equipment ($5.3


million), land and buildings ($6.6 million), and miscellaneous purchases


($4.2 million), representing 59% of all institutional purchases.


Faculty and staff households paid $11 million in taxes and purchased an


estimated $21 million in goods and services based on wages totaling $36


million.


The households of students residing in dormitories, in private residences


within the Pocatello area, and in private residences outside of the


Pocatello area made local purchases totaling $156 million


Out of area visitors spent an estimated $7 million on local purchases of


goods and services.


The indirect and inducted effects of $215 million in local spending stimulates


an additional $76 million in regional economic activity, for a total estimated


economic impact of $291 million.


Permanent residents account for approximately $101 million o f that total, with


the remaining $191 million in area expenditures attributed to the university’s


presence.


Considering the State of Idaho’s annual budgeted investment of $72 million and


its currently valued investment of $149 million in lands, buildings, and


equipment, the aforementioned regional expenditures of $191 million represent a


return on investment of approximately 87%.


Based on lifetime earnings differentials, ISU graduates maintaining a permanent


residence within Idaho are estimated to add to their lifetime earnings by an


aggregated $498 million over 40 years ($307 million if presently valued).


Institutional Expenses


Highlights


Idaho State University annually purchases more than $23 million in goods and


services from Pocatello area businesses.


Idaho firms receive 66% of the University’s institutional purchases with 59%


going to Pocatello area firms.


Approach


Records of University expenditures were obtained from the University


Comptroller. Idaho State University (ISU) issued more than 35,000 checks during


the 1995-96 academic year, excluding payroll checks to faculty and staff. Each


check was classified by vendor zip code and type of service or product


purchased. The dozens of expenditure types were then summarized into the five


categories reported in Table 1. Zip code classifications were used to identify


those expenditures that were made within the state of Idaho and those that were


made within Bannock County.


Table 1: Idaho State University, 1995-96 ExpendituresWithin Bannock


CountyWithin Idaho


Expenditure CatagoryAmountPctAmountPctTotal


Professional Services$5,475,77164%$6,699,26378%$8,613,647


Communications & Utilities$1,990,65645%$3,615,04382%$4,393,939


Insurance, Land & Buildings$6,652,55179%$6,652,55179%$8,429,554


Materials, Supplies & Equipment$5,363,40546%$5,406,87346%$11,697,428


Miscellaneous Purchases$4,240,14659%$4,289,05460%$7,170,258


Total Institutional


Expenditures$23,722,53059%$26,662,78466%$40,304,826


Since many larger vendors maintain local offices for billing purposes only,


there may be considerable leakage outside of the Bannock County and Idaho areas.


The fact that a given vendor’s mailing address is within Pocatello or even


within Idaho does not guarantee that a local economic impact has occurred.


Every effort has been made to include only the purchases of real goods and


services. Excluded are all payments to students, fringe benefits purchased for


employees, federal loans and monies which “pass through” the university from


outside sources, payments to escrow accounts, and various adjustments made


during the auditing process.


Institutional Expenditure Patterns


As shown in Table 1, Idaho State University contributes more than $23 million


annually to the local Pocatello economy through its purchases of goods and


services from area businesses. This represents 59% of all such purchases made by


the University. An additional $3 million was spent within Idaho but outside of


Bannock County. The remaining $14 million in purchases was made outside of the


state.


The University purchased more than $8.6 million in professional services during


1995-96. Three-fourths of this amount was used to purchase legal, accounting,


advertising, and architectural services from Idaho firms, with Pocatello-based


companies receiving $5.4 million or 64% of the category total.


Almost all (82%) of the University’s $4.3 million annual expenditure for


communications and utilities reflects purchases made within the state of Idaho.


Pocatello-based firms account for $1.9 million (45%) of this amount. The total


includes telephone, gas and electric utility purchases. Whether these purchases


accrue to Pocatello or to some other regional Idaho economy is difficult to


assess, given the previously stated caution regarding regional offices and


billing addresses.


During 1995-96, the University made significant purchases of land and buildings


($6.6 million), all of which are located within the Pocatello economic area.


Nearly all of the remaining $1.8 million from this category involves the


purchase of insurance policies and services from companies located outside of


the state of Idaho.


Supplies and equipment combine to make up the single largest category of


University expenditures. More than $11.6 million is expended annually on a


variety of office supplies, scientific laboratory supplies and equipment, and a


myriad of education-related supplies. These materials and supplies comprise


about $5.2 million of the category total, with the remaining $6.4 million


devoted to data processing, computing, and transportation purchases. Nearly half


(46%) of the combined total of $11.6 million is expended within the Pocatello


area, with almost the entire remaining amount going to out-of-state firms.


The University operates several auxiliary enterprises, which have their own


budgets and produce their own revenue. Examples include food services, student


housing, the University bookstore and the University’s motor pool operations.


Combined, these auxiliary services receive about $20 million in customer revenue


from students, faculty and staff, from university departments, and from


customers outside of the University. To the extent that these auxiliary


enterprises make purchases of goods for resale, those purchases are considered a


part of the University’s expenditure contribution to Idaho’s economy. Nearly


$2.4 million in Idaho purchases are made annually by the University’s various


auxiliary services, with $1.3 million being expended in the Pocatello area


economy. The above expenditures for the purchases of resale goods by the


University’s auxiliary enterprises are a part of the $7.1 million reported as


Miscellaneous Purchases in Table 1.


Miscellaneous expenditures, other than purchases for resale, involve about $4.7


million for maintenance and repair of the University’s buildings and equipment.


About $2.3 million of such expenditures are made within the Pocatello economy


for such things as cleaning, janitorial, and repair contracts.


Faculty & Staff Spending


Highlights


Faculty and staff households receive $36 million in wages and $10 million in


employee benefits.


Disposable income after taxes results in $25 million in purchases of food,


shelter, clothing and other consumer items.


The more than $11 million in taxes paid by ISU faculty and staff help


purchase an array of governmental services that benefit the entire


community.


Approach


Faculty and staff salary and benefit totals for the 1995-96 academic year were


obtained from the University Comptroller. Household expenditures were estimated


using data from previous studies of the spending patterns of Southeast Idaho


families and sub-populations, including the workforce at the Idaho National


Engineering and Environmental Laboratory1. The household expenditures of ISU


faculty and staff were calculated by applying the proportions derived from these


studies to the ISU faculty and staff salary totals. While different income


levels and varying lifestyles make it inappropriate to assume that the


calculated spending pattern applies to each and every ISU employee, its


application to derive an expenditure pattern illustrative of the entire faculty


and staff population is reasonable.


Spending Patterns


A total of 657 faculty and 1,156 staff received wages of $36.3 million during


the 1995-96 academic year. Full time employees include 510 faculty and 882


staff. Included in the part time totals are 147 faculty and 274 classified and


exempt employees. In addition to salaries, the university provided $10.1 million


in employee benefits, including its calculated portion of Social Security


(FICA), pension contributions and medical benefits.


Table 2 depicts the salary totals and the estimated aggregate expenditures made


by ISU faculty and staff. The spending for each expense type reflects the


proportions that a typical Southeast Idaho family has been determined to spend,


and is illustrated in Figure 2.


Table 2: Faculty and Staff Salary ExpendituresRecipientSalary


Faculty$19,702,878


Staff$16,630,221


Total$36,333,099


Expense TypeAmount


Taxes: Federal, State & Local$11,204,328


Housing$5,616,427


Food$3,819,238


Transportation$4,353,696


Clothing$3,172,350


Medical$2,338,360


Recreation$1,692,312


Donations & Gifts$871,746


Miscellaneous$3,264,643


Expenditures for food, clothing and transportation total $11.3 million annually,


with approximately 90% of that total being expended within Bannock County.


Housing costs consist primarily of mortgage payments, which in turn quickly


leave the local economy in the form of bank investments made outside of the


Pocatello area. Consequently, the estimated $5.6 million in housing-related


expenditures made by ISU faculty and staff are not directly infused into the


local economy in the same way that consumer expenditures would be.


On the other hand, mortgage purchases represent an induced stimulus to the


area’s residential construction market, thereby having a significant multiplier


effect on the economy of the area. (See the section entitled Impact Assessments


for a discussion of multiplier effects.)


Medical and recreational expenditures on the part of ISU faculty and staff total


$4.0 million annually, with an estimated 70% of that amount expended locally and


30% expended elsewhere. Purchases of drugs and hospital care often accrue to


out-of-state providers, so it is unlikely that the local share of such purchases


will increase.


Figure 2: Allocation of Wage and Salary Income


for a Typical Idaho Family


Donations and gifts totaling about $870,000 are contributed by ISU faculty and


staff to numerous causes and beneficiaries. While a comparatively smaller dollar


value than other expenditure categories included in Table 2, it represents 2.4%


of gross wages. Area churches and civic organizations benefit and depend on


these generous donations, which are supplemented by contributions of time and


talent on the part of faculty and staff households. The economic benefit to


Pocatello’s community life generated by these expenditures is significant beyond


the dollar values involved.


Miscellaneous consumer expenditures not included in the above categories total


another $3.2 million; they include catalogue sales, investment and gambling


expenditures, etc. About 50% of the expenditures in this category can be


attributed to the local economy, with the other half spent elsewhere.


Taxes are mistakenly not often thought of as beneficial to a local economy.


However, property taxes in particular are directly translated into governmental


services including public education and municipal services like police and fire


protection, libraries, roads, sewer, water, etc. ISU faculty and staff


contribute about 31% of their gross wages to taxes of various kinds:


About $7.3 million of the $11.2 million in aggregate taxes consist of


federal payments in the form of personal income tax withholding, social


security (FICA) contributions, and various federal taxes, e.g. alcohol,


tobacco, and gasoline.


The State of Idaho receives an estimated $2.7 million in taxes from ISU


faculty and staff, with $1.8 million being withheld for personal income


taxes. Based on consumption patterns and wages, an estimated $581,440 in


sales tax is paid by ISU faculty and staff in the course of a typical year


of consumer purchases. The State of Idaho also receives nearly $200,000 per


year in gasoline taxes and $129,000 in Alcohol, Tobacco and Vehicle taxes


from ISU households.


Property taxes and fees for sewer and trash pickup account for most of the


$1.1 million in local taxes paid by ISU faculty and staff. Property taxes


comprise $840,000 of that total, with county, city and school district


taxing authorities each receiving approximately one-third of the property


tax total.


Not all of the economic impact generated by the circulation of faculty and staff


wages would be lost to the region if the University were not here. Some unknown


but significant portion of ISU employees would likely secure employment in other


sections of the regional economy. An estimate of the proportion of faculty and


staff wages that would be “lost” to the area in the absence of the University is


calculated in the Impact Assessments section of this report.


While the present section of this report recognizes the logic of discounting the


expenditures made by faculty and staff households who would likely remain in the


area in the absence of the University, the total and more comprehensive impact


figure is used here.


Student Expenditures


Highlights


ISU student households spent an estimated $156 million in Bannock County


during the 1995-96 academic year.


Approach


Student expenditures were derived from the results of a questionnaire survey


that was distributed to randomly selected ISU students during the 1996-97 fall


semester; 611 questionnaires were completed and returned. For purposes of this


analysis, the responses were divided into three groups of interest:


dormitory residents


students who live off campus and within Bannock County and,


those who live outside of Bannock County.


The survey solicited information on student spending in several expenditure


categories. For each expenditure category, an average was calculated for each


student group, with null responses included as zero values in the aggregate sum.


The university-wide spending in each expense category for each student group was


then weighted by multiplying the corresponding survey average by the total


number of students at ISU in that group (i.e. 871 dormitory students, 6,236


local off-campus students or 5,138 out-of-area students, respectively).


Results


The measured impact of ISU student spending on the local economy is limited to


off-campus spending within Bannock County, therefore the spending excludes


monies paid to the University or to vendors and landlords outside of the Bannock


County area. Table 3 presents the total off-campus local spending in several


expenditure categories for each of the three student groups of interest.


The Housing expense category includes spending for rent, mortgage, home


insurance and furnishings except for dormitory students where off-campus


spending specifically does not include dormitory rent and would, therefor only


include spending for furnishings for that student group. Utility expenses


include costs for electricity, gas, telephone and cable services. The Education


expense category does not include tuition and is limited to spending for books


and supplies, including computers and their peripherals. Miscellaneous spending


includes clothing, general insurance, contributions, gifts and purchases that do


not fit into any of the other categories.


Dormitory Students


The average number of students residing in dormitories during the 1995-6


academic year was 871. This student group reported an average age of 25 years


and 31% indicated that, at the time of the survey, they were married. Only 12%


of this group indicated that they would be living in the Pocatello area if they


were not enrolled at the University. Consequently, a high proportion of this


group’s spending may be attributed to the University.


Dormitory students reported household spending of over $6.5 million annually or


approximately $7,486 per student household over a two-semester period not


including the summer months. The figure excludes tuition and dormitory fees, and


includes only purchases of consumable goods and services.


Over 30% of the dormitory student’s expenses are automobile related.


Miscellaneous expenses account for 25% while food (over and above the dormitory


meal plan) accounts for 21%. Housing costs were proportionately low for this


group because the dormitory rent payments were made to the University rather


than to local landlords and are consequently excluded from impact


considerations. Similarl

y most utility costs are included as part of the rent


and are also excluded, leaving Utilities to primarily consist of telephone and


cable costs.


Table 3: Annual ISU Student Expenditures for Academic Year


1995-96Expense TypeStudent TypeTotal


DormitoryLocalOut of Area


Housing$443,0007%$23,014,52327%$18,071,71628%$41,529,239


Utilities$110,5172%$8,055,7729%$7,997,09212%$16,163,381


Automobile Payments$1,068,35816%$6,187,6607%$4,580,1337%$11,836,151


Auto Operating


Expenses$967,62715%$6,633,8908%$3,751,8546%$11,353,370


Food$1,348,18021%$19,158,57222%$13,809,47721%$34,316,229


Education$100,1002%$4,445,8065%$2,612,1694%$7,158,076


Recreation$311,6775%$1,796,2072%$956,0471%$3,063,930


Medical$550,4958%$2,058,5292%$2,479,1854%$5,088,210


Miscellaneous$1,620,00525%$14,183,32317%$10,077,23916%$25,880,566


TOTAL$6,519,959 $85,534,282 $64,334,912 $156,389,153


Local Off-campus Students


The 6,236 students in this group reside off-campus but within Bannock County.


Approximately 36% indicated that they owned their living quarters while 50%


rented and the remainder reported living with family or friends. The average age


of the students in this group was 30 years with 50% indicating that they were


married. Over 57% indicated that they would live here if not enrolled at the


University.


They reported a local total annual spending of $85.5 million, which averages


$13,716 per student household, the greatest per student spending of the three


groups. Understandably, the largest spending category for this group is Housing


which accounts for 27% of its total expenditures. This is followed by Food (22%)


and Miscellaneous items at 17%.


Nearly two-thirds of this student group consists of permanent area households


with one or more members currently attending ISU on either a part-time or


full-time basis. An estimate of the proportion of this group’s total area


expenditures that would be “lost” to the area in the absence of the University


is calculated in the Impacts Assessment section of this report.


Out-of-Area Students


This student group consists of 5,138 ISU students who reside off campus and


outside of Bannock County. The average age of this group was 35 years with 66%


reporting that they were married at the time of the survey. Approximately 60%


owned their homes, 25% rented and the remainder reported living with family or


friends.


Members of this group reported a total annual area spending of $64.3 million or


about $12,521 per student household.


The proportion of those consumption purchases made in Bannock county, as opposed


to the neighboring communities where they reside, is unknown, but is presumed to


be not more than 25%.


Their spending habits were approximately the same as the local non-dormitory


students. Combining the spending of the two non-dormitory groups yields the


graph in Figure3, which illustrates the representative category spending of


ISU’s non-dormitory student households.


While the University cannot claim to have directly “caused” the entire $156


million in consumer purchases made by its students and their entire households,


it is important to recognize that a considerable number of area residents attend


Idaho State University and have purchasing patterns and habits influenced by


their student affiliation.


While the present section of this report recognizes the logic of discounting the


expenditures made by student households who would likely remain in the area in


the absence of the University, the total and more comprehensive impact figure is


used here.


Visitor Expenditures


Highlights


ISU attracts nearly quarter million visitors from outside the Pocatello area


to its many events, facilities and programs.


Out-of-area visitors spend an estimated $7 million annually on local


purchases of lodging, food, automobile-related purchases and other retail


items.


Approach


Visitors are drawn to the ISU campus to attend athletic and cultural events,


attend conferences and workshops, and to visit facilities like Holt Arena, the


Idaho Museum of Natural History, the Planetarium and the Bookstore. Other


visitors conduct business on campus, including prospective students and faculty


who are being recruited or interviewed. Still others are out-of-area personal


visitors to ISU faculty, staff and students.


The number of visitors to the ISU campus has been estimated separately for the


two visitor categories reported in Table 4. Recreational, Educational and


Business Visitors include attendees and visitors to specific ISU facilities or


sponsored events. Personal Visitors include only out-of-area visitors to


faculty, staff and students reported in surveys of those populations.


In order to obtain an estimate of the number of Recreational, Educational and


Business Visitors, each facility was polled for its attendance figures for the


1995-96 academic year. Officials representing each facility also provided an


estimate of the percentage of their attendees who originated outside of the


Pocatello-Chubbuck area. ISU’s major facilities and programs include Holt Arena,


Reed Gymnasium, the Student Union, the Idaho Museum of Natural History and the


Planetarium operated by the Physics Department. Performances held at Theatre ISU


and Goranson Hall were also included, as were visitors to the ISU Bookstore.


The number of personal visitors was estimated separately for students and


faculty/staff households. Twenty percent of the Personal Visitors were assumed


to purchase lodging for an overnight stay, based on results of the student


survey.


Table 4: Visitors to the ISU Campus by Sponsoring Department


(1995-96)SponsorAll VisitorsOut of Area VisitorsArea


(Persons)(Persons)(Visitor Days)Expenditures


Holt Arena Events433,350220,283220,283$6,619,489


Student Union Events222,81756,94869,415$2,217,115


ISU Bookstore60,0003,0001,500$39,000


Idaho Museum of Nat’l History patrons31,39020,40424,484$768,804


Continuing Education events13,2621,4685,170$483,395


Physics Department & Planetarium8,0005,8005,800$150,800


Theatre ISU patrons6,631734734$19,084


School of Applied Technology visitors3,387868964$27,921


Music Department events3,000600600$15,600


Miscellaneous ISU departments2,3221,3132,417$117,660


Visitors to ISU Students130,847130,847130,847$4,108,596


Visitors to ISU Faculty & Staff8,6538,6538,653$271,718


An estimate of the percent of out-of-area visitors who purchased overnight


lodging was made for each facility or program within the Recreational,


Educational and Business Visitors category. Lodging was estimated at $27 per


night per visitor, assuming double occupancy and the average Pocatello room rate


of $54 for 1996. Day visitors were assumed to expend a conservative $26 per day,


excluding event specific admissions. For overnight visitors the estimated $53


per day in area expenditures is consistent with other estimates for non-business


travelers2.


While it is tempting to sum the expenditures and number of visitors in each


category of Table 4, such a summary total is not recommended because an overlap


of visitors across the various categories would vastly overstate the number of


actual persons visiting the ISU campus. For example, a typical out-of-area


visitor might be included as the Personal Visitor of a student, and attend an


ISU athletic event or concert while taking advantage of noncommercial lodging


with friends or relatives.


Only out-of-area visitors are assessed as having a direct economic impact on the


Pocatello economy. While the number of local visitors is significant, and their


recreational and other spending is very real, especially to local establishments


and merchants, their spending is assumed to already be a part of the local


economy. In the absence of the ISU facility or event, they are assumed to make a


comparable expenditure elsewhere in the Pocatello economy. Their expenditures


cannot, therefore, be claimed exclusively by ISU as a part of its economic


impact on the region.


Expenditure Patterns


The Holt Arena attracts more out-of-area visitors than any other ISU facility.


More than 400,000 persons attended events held there during the 1995-96 academic


year. An estimated 220,283 of those attendees are from outside of the Pocatello


area, with about 90% of that number assumed to be purchasers of commercial


lodging. Major events such as the Dodge National Circuit Finals Rodeo attract


out-of-area visitors who remain in the area for several days, thus heightening


their economic impact.


The Pond Student Union hosts numerous conferences, workshops, and other programs


attended by outsiders as well as ISU faculty, staff, and students. Of the nearly


quarter million attendees of its programs, about 56,000 are estimated to be


out-of-area visitors. A small proportion report staying overnight, with a total


estimated area impact of $2.2 million annually.


The Idaho Museum of Natural History is visited by more than 20,000 out-of-area


patrons annually, with direct local expenditures of $768,804. The Office of


Continuing Education sponsors programs that attract an estimated 1,468


participants from outside of the area, with each staying an average of 3 days,


and representing a direct local impact of $483,395. Performances held at Theatre


ISU and Goranson Hall attracted an estimated 1,334 out-of-area patrons, while


the ISU Planetarium attracted about 5,800 nonlocal visitors.


Student recruitment, including recruitment of students to the School of Applied


Technology, is responsible for over 800 out-of-area visitors each year. Other


significant categories of visitors with business on the campus include


salespersons, accrediting teams and athletic team recruiting. Nearly 3,000


nonlocal visitors and $145,000 in direct impact can be attributed to those


visitors.


About 130,000 individuals are estimated to visit the area as the personal


visitors of ISU faculty, staff and students. The typical student reports ten


such visitors per year, a seemingly high figure, but consistent with visitor


studies conducted by universities comparable to ISU2. Out-of-area visitors to


ISU faculty and staff number about 8,653. Combined, these personal visitors


contribute more than $4.2 million into our local economy. As indicated above


(see Approach), a high percentage of Personal Visitors are included as attendees


and participants of various ISU events and programs, and should not be


considered as additional to the visitors specific to those facilities or events.


Impact Assessment


Highlights


Approximately 9% of all area economic activity are in some way related to


ISU.


The State of Idaho’s annual investment of $102 million stimulates at least


$191 million in economic activity within southeastern Idaho, for an annual


return of 87%.


Indirect and Induced Impacts


Purchasing patterns for the University, as well as expenditure patterns for its


students, faculty, staff and campus visitors were presented in detail in


previous sections of this report. Approximately $215 million in direct


expenditures are attributed to ISU’s presence using this approach.


As those monies are expended in various sectors of the area economy they serve


to stimulate additional business activity (induced effects) and additional


household spending (indirect effects) on the part of those businesses and


households benefiting from the direct expenditures. These effects combine to


produce a “multiplier effect” of total spending.


Multipliers for local institutional purchases (1.391), visitor expenditures


(1.366), household expenditures of locally resident faculty and staff (1.265),


and for dormitory students (1.260) and nondorm students (1.364) were generated


by the Regional Science Research Institute’s Input-Output model for Bannock


County. This model makes use of industry interaction data across county lines to


generate highly reliable estimates


An estimated 8 full and part time jobs, represented by $1 million of business


activity, and a wage proportion (.263), were then used to generate an estimate


of the number of full and part time jobs and the amount of wages and salaries


represented by the induced business activity.


Table 5 identifies the direct, indirect, and total impacts of each of the four


sources of economic impact under review. It identifies an additional $76.2


million in multiplier effects generated by the direct infusion of $215.7 million


in business activity within the Pocatello economy. Altogether, those four


sources of expenditures represent an economic stimulus of $291.9 million in


private sector business activity within the region.


Table 5: Summary of ISU-induced Local Spending Direct


EffectsIndirect


EffectsTotal


Effects


Students$156.4$56.2$212.6


Faculty/Staff$23.6$6.3$29.9


ISU Institutional Purchases$23.7$9.3$33.0


Visitors to ISU$12.0$4.4$16.4


Total:$215.7$76.2$291.9


Estimated contributions for each source of expenditure are also included in the


table. ISU’s 12,245 students represent the single largest proportion of impacts,


with their household expenditures totaling more than $212 million in area


business activity. The total stimulus of institutional purchases generates


another $33 million, while the households of faculty and staff ($29 million) and


campus visitors ($16 million) generate significant impacts.


During 1996, Bannock County’s 73,379 residents earned $854 million in wage and


salary income, while county establishments conducted $1.2 billion in retail


business sales. Nonretail business added another $2 billion, yielding a gross


county product value of about $3.2 billion. This perspective suggests that about


9% of the area’s economic activity is in some way connected to ISU, with nearly


75% of that amount due to the local spending of ISU students and their


households.


Discounting Local Residents


A significant portion of the University-related expenditures included in Table 5


would likely continue to occur in the absence of the University. Consequently,


it is realistic to discount contributions made by area residents whose


households would be reasonably assumed to maintain comparable contributions to


the local economy if ISU were to cease to exist.


The discounting procedure adopted for purposes of this study involves a


relatively straightforward estimate of the proportion of ISU students, faculty


and staff who would likely remain in the Pocatello area in the absence of the


university. The proportion of institutional purchases and out-of-area visitor


expenditures that would occur in the absence of the university is assumed to be


near zero. Based on a survey of students conducted in conjunction with this


report, an estimated 39% of the $212 million in student household expenditures


would be lost in the absence of the University. A similar survey of faculty and


staff reveals that 80% of faculty and 25% of staff would be lost to the area if


the university were to cease to exist. The prorated proportion of ISU’s


estimated $29.9 million in wage-based local purchases at risk under these


assumptions is $18.5 million.


Table 6: Discounting Area Resident Impacts Gross


Total EffectsExpenditures of


Permanent ResidentsNet


Total Effects


Students$212.6$82.7$129.9


Faculty/Staff$29.9$18.5$11.4


Institutional Purchases$33.0$0.0$33.0


Visitors$16.4$0.0$16.4


Total$291.9$101.2$190.7


A summary of these calculations and assumptions is shown in Table 6. The net


effect of this discounting procedure is to reduce the local impact of Idaho


State University on the area’s economy by about $91 million. Consequently,


$190.7 million in area expenditures remain as directly attributable to ISU’s


presence.


Cost Benefit Analysis


Another way to look at the economic impact of Idaho State University involves


cost-benefit analysis, i.e. a comparison of value returned for investment made.


ISU represents a capital investment on the part of the State of Idaho of $139


million in fixed assets including buildings, property and equipment. Annually


the State of Idaho appropriates about $72 million to fund ISU operations. The


University also receives about $41 million per year from federal sources


(primarily student scholarships and loans), $23 million from student fees and


sales of auxiliary services, and another $13 million from private and other


sources. Altogether, the University operates on annual revenues of $149 million


and an investment in property and equipment of $139 million.


Return on those investments can be measured many different ways, but the one


used here strives to place a value on the educational benefit received by ISU


graduates.


According to a similar assessment conducted by Boise State University3, a 1993


male college student’s lifetime earnings are enhanced by $456,362 over earnings


he would have received with only a high school diploma. Similar estimates are


generated for female graduates, and for recipients of occupational certificates,


academic Associate degrees and Master degrees. Based on the number of each type


of graduate and their gender, the lifetime earnings of ISU’s 2,083 graduates for


the year 1996 are increased by an aggregated $863 million! To realize an


equivalent 40-year return, the initial investment would be valued at $466


million assuming an estimated 3% annual rate of return.


Table 7: 40 Year Estimated Lifetime Earnings Differential for ISU Graduates


Estimated Aggregated Lifetime Earnings Differential


GraduatesAll 1995-96 GraduatesIdaho Resident Graduates


Occupational (VoTech)521$72,961,728$42,242,026


Academic AA17$3,845,089$2,226,158


BA1,047$588,928,485$340,966,875


MA498$197,222,276$114,184,090


Totals2,083$862,957,578$499,619,150


Based on information compiled by ISU’s Office of Alumni Relations, about 58% of


all known graduates of ISU programs reside within the State of Idaho.


Proportionately, Idaho residents realize a lifetime earnings enhancement of $499


million because of their educational attainment, with a present value of


approximately $307 million. This present value is roughly equivalent to the


“human capital” return on ISU’s activity.


In addition to the estimated value of an education received by ISU’s graduates,


the University has been shown (Table 6) to annually stimulate approximately $191


million worth of economic activity within the Pocatello area. Combined, the two


forms of benefits total $498 million.


This total annual benefit of $498 million costs the taxpayers of Idaho about $72


million per year, plus an investment of land, buildings and equipment worth $149


million. If the land and building assets are divided over a five-year period,


the combined annual cost to the State of Idaho for operating Idaho State


University is estimated at $102 million.


Summary


In summary, the State of Idaho’s calculated annual investment of $102 million


realizes an annual return valued at $498 million. This is very close to a


five-to-one return on investment, if the value of the education received is


given an estimated dollar value.


A more conservative estimate of the State of Idaho’s return on its ISU


investment can be calculated by excluding any reference to the value of the


education received by its graduates. The direct and indirect impacts of


institutional purchases, faculty, staff, and student household expenditures,


plus the expenditures of out-of-area visitors and the prorated expenditures for


land, buildings, and equipment totals a previously calculated $191 million.


Those expenditures alone represent an 87% return on the initial $102 million


investment.


The realization of the above rates of return on an ongoing basis, year after


year, testifies to the significant “profitability” of Idaho State University in


addition to its measured economic impact on Pocatello and the State of Idaho.


1INEEL Impacts, US Dept of Energy, Idaho Operations Office, 1997; Idaho Income


Survey, Associated Taxpayers of Idaho, 1992; and Microvision Market Segmentation


System, EquiFax/National Decision Systems, 1998.


2The Economic Impact of Northern Arizona University on Coconino County (1995),


College of Business Administration, Northern Arizona University, 1995; The


University of Virginia’s Impact on the Charlottesville Metropolitan Area, Center


for Public Service, University of Virginia, 1990.


3The Impact of boise State University on the Economy of Idaho, Chuck Skoro,


Department of Economics, Boise State University, 1996.

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