Background
In fall 2009, The University of Iowa contracted Tripp Umbach—a national leader in economic analysis of higher education and health care institutions—to measure the University’s economic, employment, and government revenue impact. Tripp Umbach used fiscal year 2009 data from the University and information from its national databases to develop the findings presented on this site.
The following questions and answers outline the scope and methodology of the Tripp Umbach study. For more information, download the study’s executive summary or full report.
What is economic impact?
Economic impact begins when an organization spends money. Economic impact studies measure the direct impact of this spending, plus additional indirect spending that happens as a result.
In this study, direct impact refers to dollars generated within Iowa due to The University of Iowa’s presence. These include University spending on goods and services, spending by University employees and visitors, and business volume generated by UI spending. The study assesses only dollars that remain in Iowa—purchases from out-of-state vendors, for example, are not included.
Indirect impact includes the “multiplier” of spending from companies that do business with the University. These multipliers estimate the ripple effect in the state economy that results from direct spending. For example, when the University purchases goods or services from local vendors, these vendors re-spend additional dollars in the local economy, causing a multiplier effect.
What multipliers were used in this study?
Tripp Umbach uses economic impact multipliers recommended by the American Council on Education to assess indirect economic impact—or how direct spending generates more spending within a local economy. The multipliers used in this study are based on research by Caffrey and Isaacs in 1971, and are appropriate for major research universities.
Economic impact multipliers: State business volume multiplier=2.3
What methodology was used in this study?
Tripp Umbach derived its methodology from the standard set of impact research tools developed by the American Council on Education (ACE) for measuring college and university economic impact. ACE-based methodology has been used for hundreds of impact studies throughout the United States and employs linear cash-flow modeling to track the flow of funds from an institution within a designated geographic area.
What is employment impact?
Employment impact measures direct employment—faculty, staff, student employees—plus additional jobs created as a result of UI economic activity.
Indirect employment impact refers to non-University jobs that exist throughout the region due to the University’s economic impact. In other words, jobs related to the size of a population—city services, employees at local hotels and restaurants, clerks at local stores, and residents employed by UI vendors.
The approximate ratio of direct to indirect employment for The University of Iowa is 1 to 2.5. This is a much stronger ratio compared to other industries, which typically yield one indirect job for every direct job.
How is the tourism impact of an institution measured?
By their nature, universities are major tourism destinations. Economic impact models created by Tripp Umbach for The University of Iowa calculate the net impact of spending within Iowa by visitors from out of state—fresh dollars drawn into a state’s economy. These models include only spending by out-of-state visitors.
What is the difference between direct and indirect taxes?
Direct tax dollars include sales taxes and net corporate income taxes paid directly by an institution and its employees to the state, while indirect taxes include taxes paid to the state by vendors who do business with the institution.
Is this a one-time impact or does the impact repeat each year?
Results reported in this study represent fiscal year 2009, and The University of Iowa generates similar impacts on an annual basis. This impact may be higher or lower in future years depending on University enrollment, capital expansion, increases in external research funding, state appropriations, and other factors.
What types of economic impacts are typically presented in a comprehensive economic impact report?
Institutions use three standard measures when quantifying and communicating their economic impact:
- Direct spending—dollars that remain in Iowa after being spent by the University, its employees, and its visitors
- Indirect spending—dollars spent in Iowa by businesses that receive money from the University
- Induced impacts—dollars spent as a result of products or services provided by the institution; for example, capitalization of University research innovations
What are Tripp Umbach’s qualifications to perform an economic impact study for The University of Iowa?
Tripp Umbach is the national leader in economic impact analyses for leading health care organizations, universities, and academic medical centers. The firm has completed 150 such studies over 20 years for clients that include Pennsylvania State University, Ohio State University, University of Minnesota, University of Michigan, Unviersity of Washington, and many others.
Tripp Umbach recently completed the fourth national study of all 125 medical school and 400 teaching hospital affiliates for the Association of American Medical Colleges. The firm has completed statewide studies for multiple institutions in Ohio, New York, Pennsylvania, Virginia, South Carolina, Wisconsin, and Minnesota, plus metropolitan studies in Boston, Pittsburgh, Philadelphia, and Chicago.