SJR Column: Economic Impact, January 2015

Business and community leaders know well the work of Richard Florida, whose path-breaking 2004 book, The Rise of the Creative Class, describes the forces and factors that drive social and economic prosperity in any community. More recently, Florida and his colleagues published an expanded version of their research, The Rise of the Creative Class Revisited, and again concluded that the presence of a thriving university, a key institution of the “creative economy,” is a necessary condition for prosperity. Universities are both talent magnets and talent producers and in myriad ways help to establish the “quality of place” of the communities where they are located.

But is it possible to calculate the actual economic impact, the financial value creation, of a university on its community? The answer is “yes” and the Springfield campus of the University of Illinois has recently done just that with the help of Economic Modeling Specialists International (EMSI), a nationally known research firm whose economists have conducted over 1,200 economic impact studies for colleges and universities across the country.

A central element of the recent study, which uses fiscal year 2013-14 student and financial data, is a regional economic impact analysis that estimates three effects: university operations, student spending, and the increased productivity of college-educated alumni who were employed in the regional workforce during the analysis year.

The numbers are impressive. In terms of university operations, UIS is, of course, an important employer in Sangamon County. In 2013-14, the campus employed 1,129 faculty and staff with a total payroll of $67.1 million, much of which was spent by UIS employees in the county on food, housing, clothing and other living expenses. UIS is also a large-scale buyer of goods and services – spending $31.1 million in the analysis year for supplies, professional services and facilities. The total income that UIS created in 2013-14 as a result of its day-to-day operations was $75.3 million.

Student spending is also an important part of the economic impact of the campus. UIS served 6,374 unique students during the 12-month study period and, as many Springfield business owners appreciate, college students spend money (beyond tuition, fees and books) on food, rent, technology, transportation, entertainment and many other expenses. Considering the spending of only the 20% of UIS students who relocated to Sangamon County to attend university, those students add approximately $5.9 million in income to the local economy each year.

Though the impact of UIS operations and student spending is impressive, UIS’s greatest economic impact on the community comes with the education provided for graduates who remain here after completing their degrees.

Almost 30% of the college-educated workforce in Sangamon County has earned at least one degree from the campus and thousands of UIS alums are employed throughout the area- generating income, raising business profits through their increased productivity and paying taxes. During the analysis year, the study shows that UIS alumni generated $95.5 million in added income to the county. This figure represents the higher wages earned, the increased output of businesses that employed them and the multiplier effects that occurred as alumni and their employers spent money at other businesses.

Thus, the overall economic impact of UIS on the local community during the analysis year amounted to $176.8 million ; equal to the sum of the university operations effect ($75.3 million), the student spending effect ($5.9 million) and the alumni productivity effect ($95.5 million).

In addition to the economic impact analysis, the EMSI study also investigated the benefits that the university generates in return for the investment made by key stakeholder groups – students, society and taxpayers. Though results of the investment analysis are too lengthy to describe in detail in this column, they clearly demonstrate that a UIS education is one of the best investments students and their families, as well as society and taxpayers, can make. The stream of higher future wages that graduates receive in return for their educational investment continues to grow throughout their working lives with bachelor’s degree completers in Sangamon County earning on average $63,300 at the midpoint of their careers, $29,900 more per year than a county resident with only a high school diploma. The study also demonstrates that for every $1 spent by Illinois taxpayers to support UIS (via the state’s annual allocation), Illinois gains $3.50 in added taxes from higher-earning graduates and public sector savings due to the reduced demand for government-funded social services.

Though the EMSI study does not measure other important effects of the university such as social, cultural and community service contributions, it does provide a rich source of data that demonstrates the very real economic value of UIS in Springfield – $176.8 million per year. It also confirms Florida’s conviction that a university is indeed a key institution of a creative economy and an important contributor to establishing the “quality of place” that is so necessary for prosperity now and in the future.

The entire report, as well as other related documents, is available at http://www.uis.edu/impact/.

Susan J. Koch, Chancellor of University of Illinois Springfield

Chancellor Susan J. Koch