Regional Economic Impacts Of Idaho State

Regional Economic Impacts Of Idaho State 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%$40,304,82 6 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. Similarly most utility …