College: Modeling Private College & University Impacts

INTRODUCTION:

Now that you have read Considerations when Conducting College & University Economic Impacts, you are ready to examine the economic impact of a private college or university.  Private colleges and universities spend and save money in a very different manner than their public counterparts. Remember, each school is unique, so the more details that you enter in the model, the more accurate the results.

The goal of this article is to be a guide in framing your private college impact study.  Spending can be split across operations, university labor, student spending, visitor spending, and capital expenditures.  

THE PROCESS:

For this example, we will be looking at Input Output University (IOU), a four-year liberal arts school known worldwide for their advanced economic theory program.  They are located in Huntersville, NC in Mecklenburg County. We know that IOU spends $120 million in annual operating costs.  

STEP 1 – OPERATIONS EXPENDITURES 

If only total operations expenditures for the university are known, the total can be run through Sector 473 - Junior colleges, colleges, universities, and professional schools.  This Sector includes all private colleges and universities while excluding all public institutions. Note that some specialty, business, and technical schools are actually included in Sector 474 - Other educational services.

ALTERNATE APPROACH:

If detailed spending information is available, the same steps in Modeling Public College & University Impacts can be followed using the Bill of Goods approach.

STEP 2 – LABOR EXPENDITURES

Since labor costs were not modeled as a part of the school’s operations expenditures in Step 1, we can add this information to our Industry Output Event. IOU spends $90 Million on salaries and benefits to their 1,200 employees (note this was not included in the $1.2 million operations figure).  We can add the Employment, Employee Compensation, and zero out the Proprietor Income as there is no ownership entity for IOU.  

CONSIDERATIONS:

• These should be fully loaded payroll values which include wage and salary, all benefits (e.g., health, retirement) and payroll taxes (both sides of social security, unemployment taxes, etc.)
• If the University’s employees commute into the study area for work, then they should not be included in the Labor Income Event

STEP 3 – STUDENT SPENDING

Personal spending by private school students on goods and services (outside of tuition and fees paid to the school) will also have an impact on the local economy. To estimate these impacts, we will need to know how much they spend on personal items and what they purchase. Additional details on outlining student spending can be found in Surveying for Input-Output. Examples of potential spending categories include:  

Student Spending

• Books
• Transportation
• Food & beverages
• Alcohol
• Recreation & amusement
• Retail

IOU has 5,000 students and their yearly spending is outlined as follows: 

STEP 4 - VISITOR SPENDING

Colleges and universities welcome sporting event spectators, patrons of the arts, parents, siblings, and prospective students to campus as visitors.  The spending by these visitors can be captured via survey and used as inputs in the model by adding expenditures to an additional Industry Output Event.  Consider spending categories such as:

• Lodging 
• Transportation to the city
• Transportation within the city
• Gasoline
• Food & beverages
• Retail
• Recreation & amusement

IOU estimates that 15,000 total guests visit each year, for an average of two days,  and estimates their spending as follows:

STEP 5 - CAPITAL EXPENDITURES

Often times, colleges and universities also like to show their economic impact in terms of large-scale construction projects.  IOU just opened a brand new dormitory at a cost of $2.1 million. This can be entered as an Industry Output Event in Sector 60 - Construction of new multifamily residential structures.  

Now we have a complete picture of IOU’s direct spending as shown below.  Remember to give each of your Events a memorable name so that using the FILTERS button on the Results screen is seamless.

STEP 6 – RUN THE IMPACT

Now either use the button at the top to select all or highlight each Event and drag them into your Group.  Next, hit run.

 

STEP 7 – ANALYZE THE RESULTS

The results will show you the economic impact of all of the Events you entered which will include the Industry Events and the Labor Income Event(s). If you want to look at the results by Event, use the FILTERS button and select which of the Events you would like displayed.  For example, choosing all three Operations Events and the Labor Event will filter the results to only include the economic impact of the university operations.  

Total 2019 Operations Impact of Input Output University on Mecklenburg County, North Carolina

Total Impact of Input Output University 2019 Dormitory Construction on Mecklenburg County, North Carolina

RELATED TOPICS:

Considerations when Conducting College & University Economic Impacts

Modeling Public College & University Impacts

Surveying for Input-Output

Tourism Spending

CASE STUDY:

Economic Impacts of California State University Northridge: How One University Campus Discovered Its Economic Significance

Written July 24, 2019