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. Similarly 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.