Inside Iowa State

Dec. 7, 2007

Study finds Iowa State worth $1.52 billion to state economy in 2006

by Mike Ferlazzo, News Service

Iowa State University accounted for $1.52 billion in state economic impact during the 2006 fiscal year, according to a report by ISU economists David Swenson and Liesl Eathington.

The economists used the Iowa State University Fact Book 2006-2007 -- an annual compilation of university student, performance and operational data -- and an input-output econometric model in compiling their report. The model provides a detailed measurement of the characteristics of the Iowa economy, and allows an estimate of the relationships that university and student activities have with other industries and service providers within the state. Once the model was constructed, a simulation was run to measure how the current economy responded to or demonstrated dependence on the university.

"It's obvious that an institution is going to have an economic impact," said Swenson, an associate scientist and lecturer in economics and community and regional planning. "What I want to know is, how much is it, and how does it fit into all of the economic activity in the state? So, in my case, this is purely an objective piece of inquiry on how much.

"The other part is that I don't think the average citizen of Iowa understands the scope of services the university provides as both an educational and national research institution."

The focus

Swenson said the study focused on four areas:

• The university's value as an educational and research institution -- drawing students to the region, and external funding sources for research projects that impact people in the region and worldwide.
• How ISU interacts and relates with all the service providers that have inputs into the university.
• How ISU employees and the university's suppliers spend money within their communities.
• How many students the university attracts, and how they spend their money to contribute to the local and state economy.

"This study measured the economic impact of everyone affected by the university -- either directly or indirectly -- and how they go about spending their money to contribute to the local economies," he said. "You get an estimate of all the jobs that are created by the university and, more importantly, all the income that is sustained by the university in the economy."

Ripple effect

In addition to ISU's overall economic impact, the research determined:

• The direct economic output value of all Iowa State services was $860.95 million, of which $579.5 million in labor incomes were paid to 13,843 faculty, staff and student workers.
• ISU required $180.64 million in Iowa-supplied goods and services, supporting 2,230 additional jobs earning $62.7 million.
• When the university and the supplying sector's employees converted their wages into household spending, they sparked another $479.8 million in purchases, which yielded another 5,342 jobs earning $145.1 million.
• All totaled, ISU either directly or secondarily accounted for 21,415 jobs and $787.3 million in labor income.
• Using ISU student aid budgets to estimate all non-educational spending, it was determined that ISU students spent $162.3 million in the central Iowa economy for necessary goods and services such as housing, food, travel, medical care and entertainment. That spending supported 1,805 jobs and $37.12 million in incomes.
• When considering additional supply demands and household purchases stimulated by ISU student spending, the total economic value was $229.4 million in industrial output, requiring 2,473 jobs creating $58.4 million in wages.

"We have the university as an educational institution and it provides a set of goods and services to students and to the state of Iowa," Swenson said. "When we do economic impacts, though, we have to take into account the fact that our students are residents of a community. But for the university's presence, we wouldn't have these students here. So what we want to know is, because students have a wide array of non-university spending, what's their contribution to the regional economy?"

Swenson said this study did not examine the economic impact of Iowa State as a cultural, entertainment, recreational and athletic center that annually attracts thousands of visitors.

A complete copy of the report is available online.

"This study measured the economic impact of everyone affected by the university -- either directly or indirectly -- and how they go about spending their money to contribute to the local economies. You get an estimate of all the jobs that are created by the university and, more importantly, all the income that is sustained by the university in the economy."

David Swenson