The Town And Gown Economy

What is the short-term economic impact of college- or university-related spending on the communities that host Georgia’s institutions of higher education?

In college towns across our state, the question is a perennial one. I recently quantified the economic benefits that each of the University System of Georgia’s institutions convey to their communities. I estimated benefits for three important categories of expenditures that recur on a regular basis: spending by the institutions themselves for salaries, benefits, operating supplies and expenses; spending by students; and spending by the institutions for capital projects.

My estimates are based on input-output models of each institution’s regional economy, certain necessary assumptions and available data on annual spending. The emphasis is on funds received by residents in the host communities. The study reports expenditures and impacts for the 2006 fiscal year – July 1, 2005 through June 30, 2006. Because Georgia Gwinnett College did not enroll students until the fall of 2006, its impact is not estimated.

In the simplest terms, the total economic impact of all 34 institutions on their communities was $10.4 billion in FY 2006. Total output impacts are the most inclusive and largest measures of economic impact – the equivalent of business revenue, sales or gross receipts. Each institution’s output impact is the change in regional output due to spending by the institution and by students.

Each of the state’s six research and regional universities had substantial economic impacts on their communities: The University of Georgia’s impact on Athens was $2.2 billion; Georgia Tech’s impact on Metro Atlanta was $1.7 billion. Georgia State’s impact on Metro Atlanta was $1.1 billion, and The Medical College of Georgia’s impact on Metro August was nearly $900 million. The impact of Georgia Southern on Statesboro was $423 million; Valdosta State University’s impact on its region was $274 million.

Among Georgia’s 16 state universities and colleges, the largest impacts were generated by Kennesaw State University ($518 million), the State University of West Georgia ($291 million), Columbus State University ($197 million), Armstrong Atlantic State University ($182 million) and Clayton College and State University ($176 million).

Among Georgia’s 12 associate degree colleges, the largest impacts were generated by Georgia Perimeter College ($476 million), Darton College (nearly $100 million), Gordon College ($84 million), Georgia Highlands College ($79 million), Middle Georgia College ($63 million) and Coastal Georgia Community College ($62 million).

Of the total output impact, $6.9 billion (67 percent) is initial spending by institutions and students; $3.5 billion (33 percent) is the induced or re-spending (multiplier) impact. Dividing the total output impact ($10.4 billion) by initial spending ($6.9 billion) yields an average multiplier value of 1.50. On average, every dollar of initial spending generates an additional 50 cents for the host region’s economy.

In terms of gross regional product, value added is $6.3 billion (61 percent) of the $10.4 billion output impact, with domestic and foreign trade making up the remaining $4.1 billion (39 percent). The $6.3 billion value-added impact equals 1.6 percent of Georgia’s 2006 gross state product. Labor income received by residents of host communities equals $4.6 billion, or 73 percent of the value-added impact.

The collective employment impact of all 34 institutions in FY 2006, including multiplier effects, is 104,517 full- and part-time jobs. Approximately 42 percent of these positions are on campus and 58 percent are off-campus. On average, for each campus job, 1.4 off-campus jobs exist because of spending related to the institution. Jobs generated by the University System account for 2.6 percent of all the jobs in Georgia, or about one job in 39.

I focused only on the short-term impacts of three types of recurring college-related spending. The statistics don’t include spending associated with one-time outlays for things such as capital projects.

Nor did I attempt to evaluate the institutions’ long-term impacts.

Categories: Economic Development Features, Features