Why an Economic Impact Study?

by Kjell Christophersen, Senior Economist, EMSI

Impact studies are sometimes in vogue. Sometimes not. In these tough economic times, many college presidents may not be keen on conducting such studies because of the perception that they won’t make a difference. Drastic budget cuts are coming anyway, so what’s the point in having the numbers?  Plus, especially during difficult economic times, taxpayers tend to vote with gusto against anything that will increase their taxes, and for anything that will reduce their taxes.

Fair enough. But economic impact studies aren’t just about chasing money for the college from the state and federal taxpayers. They have value in many other areas as well, chief among which is goodwill.

Data-Informed Analysis

Goodwill is all about changing the perception that colleges are nothing but a drain on taxpayer monies.  How is the college perceived as an economic neighbor? Does the local community send grumbling letters to the editor about how the college reduces the tax base since it is tax exempt? And what if the college seeks to expand onto previously taxed property, which will obviously reduce the tax base even further?

Such rhetoric in the local press can be damaging unless the college makes it a priority to change this perception—and this is a long-term proposition that cannot be solved with just one or two op-ed responses. Arguments must be informed by data, not anecdotal arguments. A smaller tax base because of the college’s occupation of land that would otherwise be on the tax rolls can be easily countered. Communities earn far greater tax benefits by having thousands of students who all spend money locally and generate taxes than they earn by being merely tax exempt. This simple and obvious fact needs to be backed up by credible data and presented to the community not once, but several times and from different perspectives all leading to the same result—a gradual recognition by the community that the college is a good economic neighbor.

Workforce Quality

Another way to establish goodwill is to let the community know how the college has contributed to both the quantity and quality of the regional workforce over several decades. Say a college was established in 1960 and has been growing for the past 52 years. There are still people active in the regional workforce who attended the college as far back as 1982, some 30 years ago. Adding up all of the past students and their credit achievements over time, we can derive a credible estimate of how many college credit hours are still actively contributing economic value the regional workforce. This is what we call the productivity effect. Only EMSI’s economic impact study provides a credible data-driven measure of this significant economic value.  It measures the economic impact associated with education, not just how much the college spends.

The productivity effect is a measure of how much larger the regional economy is because of the presence of the college in its midst. This is a powerful goodwill generator, one that legislators and stakeholders will find difficult to dispute. It may not fend off the budget cuts, but over time and with continuous marketing exposure in the media, public opinion will eventually sway in favor of the college.

Conclusion

Frequent economic impact studies will inform the public that the college does not merely draw on taxpayer funds, but actually provides a strong return on investment for the taxpayers themselves.

Click here to learn more about the study. Feel free to contact us if you have any thoughts or questions.

Read more at Economic Modeling Specialists (EMSI blog)