DEFINITION OF TERMS

ORGANIZATIONAL DEFINITIONS

METHODOLOGY DEFINITIONS

EMPLOYMENT DEFINITIONS

ECONOMIC IMPACT VALUE DEFINITION

GOVERNMENT REVENUE IMPACT DEFINITION

VISITOR DEFINITIONS

VISITOR SPENDING

COMMUNITY BENEFITS

RESEARCH IMPACT DEFINITION


DEFINITION OF TERMS


Study Year

Fiscal year was defined as FY16, October 1, 2015 – September 30, 2016

Total Industry Output

The total impact of an organization includes the spending of the organization, the labor income expenditures, and the value-added to the economy as a result of the organizational spending; this is described as the total industry output.

Total Economic Impact

The total impact of an organization is a compilation of the direct impact, the indirect impact, and the induced impact generated in the economy as a result of the organization.

Direct Economic Impact

Direct impact includes all direct effects the organization has on the region due to the organization’s operations. These include direct employees, organizational spending, employee spending, and spending by patients and visitors to the organization.

Indirect Economic Impact

The indirect impact includes the impact of local industries buying goods and services from other local industries. The cycle of spending works its way backward through the supply chain until all money is spent outside of the local economy, either through imports or by payments to value added.

Induced Economic Impact

The response by an economy to an initial change (direct effect) that occurs through re-spending of income received by a component of value added. IMPLAN’s default multiplier recognizes that labor income (employee compensation and proprietor income components of value added) is not lost to the regional economy. This money is recirculated through the household spending patterns causing further local economic activity.

Multiplier Effect

The multiplier effect is the additional economic impact created as a result of the organization’s direct economic impact. Local companies that provide goods and services to an organization increase their purchasing by creating a multiplier.

Government Revenue

Government revenue that is collected by governmental units in addition to those paid directly by an organization, including taxes paid directly by employees of the organization, visitors to the organization, and vendors who sell products to the organization.

Direct Employment

Total number of employees, both full-time and part-time, at the organization based on total jobs.

Indirect Employment

Indirect employment is the additional jobs created as a result of the organization’s economic impact. Local companies that provide goods and services to an organization increase their number of employees as purchasing increases, thus creating an employment multiplier.


ORGANIZATIONAL DEFINITIONS

For the purposes of the impact analysis UAB is defined as the combined impacts of the UAB Academic, the UAB Health System, and Southern Research. These entities are further defined as:

  • UAB Academic – The UAB Academic impact analysis included all schools and colleges of UAB including UAB Arts (AEIVA, Alys Stephens Center) and UAB Athletics.

  • UAB Health System – The UAB Health System impact analysis included the UAB Health System Corporate Office, the UAB Hospital, the University of Alabama Health Services Foundation (UAHSF), Medical West, Baptist Health System in Montgomery, Triton Health Systems / Viva Health Group, and UAB Callahan Eye Hospital Authority.

  • Southern Research – Southern Research impact analysis included only the operations of Southern Research.

 


METHODOLOGY DEFINITIONS

In 2010, UAB contracted with Tripp Umbach to conduct a similar economic impact analysis of their impacts on the state. The 2010 analysis was completed using an ACE-based linear cashflow methodology; the current study was completed using IMPLAN methodology. It is important to understand the different methodologies as the output differs related to methodology utilized. The different methodologies are described below:

ACE-based Linear Cash-Flow Methodology – The methodology employed in the 2010 UAB economic impact study was derived from an original set of research tools and techniques developed for the American Council on Education (ACE). (Caffrey, John and Isaacs, Herbert, “Estimating the Impact of a College or University on the Local Economy,” American Council on Education, 1971) The ACE-based methodology employs linear cash flow modeling to track the flow of institution-originated funds through a delineated spatial area. The ACE-base methodology distinguishes the economic impact of the institutions that are attributable to funds brought into the state from out-of-state sources. The application of this “fresh dollar” model provides a first-line measure of the initial direct expansion in the state economy caused by the institution of study. The final Tripp Umbach, ACE-based, linear cash-flow model is a hybrid model that includes a fresh-dollar approach feeding into a traditional model that tracks institutional in-state spending. Thus, the final model used for the 2010 study measured funds brought into the state together with the ultimate flow of these funds through the state economy and the effect on economic expansion, job growth, and enterprise development. This methodology has been utilized by Tripp Umbach for more than 10 years in quantifying the economic impact of all Association of American Medical Colleges (AAMC) member medical schools and member teaching hospitals.


IMPLAN Methodology – The economic impact of UAB was estimated using IMPLAN (IMpact Analysis for PLANning), an econometric modeling system developed by applied economists at the University of Minnesota and the U.S. Forest Service. The IMPLAN modeling system has been in use since 1979 and is currently used by over 500 private consulting firms, university research centers and government agencies. The IMPLAN modeling system combines the U.S. Bureau of Economic Analysis’ Input-Output Benchmarks with other data to construct quantitative models of trade flow relationships between businesses and between businesses and final consumers. From this data, one can examine the effects of a change in one or several economic activities to predict its effect on a specific state, regional or local economy (impact analysis). The IMPLAN input-output accounts capture all monetary market transactions for consumption in a given time period. The IMPLAN input-output accounts are based on industry survey data collected periodically by the U.S. BEA and follow a balanced account format recommended by the United Nations.

IMPLAN’s Regional Economic Accounts and the Social Accounting Matrices were used to construct state- and CSA-level multipliers, which describe the response of the economy to a change in demand or production as a result of the activities and expenditures of UAB. Each industry that produces goods or services generates demand for other goods and services, and this demand is multiplied through a particular economy until it dissipates through “leakage” to economies outside the specified area. IMPLAN models discern and calculate leakage from local, regional and state economic areas based on workforce configuration, the inputs required by specific types of businesses, and the availability of both inputs in the economic area. Consequently, economic impacts that accrue to other regions or states as a consequence of a change in demand are not counted as impacts within the economic area.

The model accounts for substitution and displacement effects by deflating industry-specific multipliers to levels well below those recommended by the U.S. Bureau of Economic Analysis. In addition, multipliers are applied only to personal disposable income to obtain a more realistic estimate of the multiplier effects from increased demand. Importantly, IMPLAN’s Regional Economic Accounts exclude imports to an economic area, so the calculation of economic impacts identifies only those impacts specific to the economic impact area. IMPLAN calculates this distinction by applying Regional Purchase Coefficients (RPC) to predict regional purchases based on an economic area’s particular characteristics. The RPC represents the proportion of goods and services that will be purchased regionally under normal circumstances, based on the area’s economic characteristics described in terms of actual trade flows within the area.


EMPLOYMENT DEFINITIONS

IMPLAN analysis is conducted to measure jobs/positions (part-time or full-time), not full-time equivalents (FTEs). Full-time and part-time employees generate impact in the economy and support additional indirect and induced employment throughout the state of Alabama. Employment data of the UAB Academic, UAB Health System, and Southern Research was provided as an output of all individuals who receive a paycheck from the respective institution. This includes all full-time, part-time, and employed faculty, staff, and students.


ECONOMIC IMPACT VALUE DEFINITION

The overall economic impact values provided in this report for UAB, UAB Academic, UAB Health System, and Southern Research include the following impact values that were broken out as sub-analyses:

  • Organizational spending – capital and operational

  • UAB Arts

  • UAB Athletics

  • UAB Research

The impact values of UAB, UAB Academic, UAB Health System, and Southern Research that were presented in this report that are not included in the overall economic impact value and are, therefore, in addition to the economic impact of the organization are:

  • Government revenue impacts

  • Community benefit impacts

  • Alumni impacts

  • Individual institutional impacts


GOVERNMENT REVENUE IMPACT DEFINITION

Government revenue impacts generated in the current, FY16 study included all taxes paid by each of the UAB entities to the state of Alabama and the Birmingham CSA (i.e., payroll, property, sales, unemployment, income, and any other taxes paid to the state and local government). Any federal taxes paid by UAB were not included in the government revenue impacts (i.e., FICA payments). Differences in methodology have also played a role in the differences in reported government revenue impacts of UAB from 2010 to 2017.


VISITOR DEFINITIONS

Impact analysis looks to quantify the impact of the attraction of “fresh” dollars to a region. Therefore, when including visitor spending in the impact analysis of a university, health system, or other organization, the analysis will only include those visitors coming to a region from outside of said region. Visitors to events who also live in the region would have spent their dollar in that region otherwise; therefore, this dollar was not attracted to the region as a result of the organization being analyzed.

For UAB, the impact analysis looked at impacts to the state of Alabama and the Birmingham CSA region. Visitors to UAB were only counted if they were from outside of said region being analyzed.


VISITOR SPENDING

Tripp Umbach uses federal per diem rates to estimate visitor spending in an area. Per diem rates can be found here by area: http://www.gsa.gov/portal/content/104877. Tripp Umbach has utilized per diem rates to estimate visitor spending as they can be considered a conservative measure (i.e., visitors generally spend more than the per diem rates in any given area).

The rates utilized specifically for this analysis were:

  • Birmingham region = $96 for lodging; $59 for meal and incidental expenses

  • Standard for Alabama = $91 for lodging, $51 for meal and incidental expenses


COMMUNITY BENEFITS

Community benefits provided in this report outline two forms of impact — monetary donations made by employees and students to local nonprofits as well as volunteer hours that are valued at a monetary value.

  • Tripp Umbach has conducted survey research to estimate the amount of monetary donations a student, staff, faculty, and physicians will spend in a year. This amount differs per individual but ranges from $500-$700. Tripp Umbach also understands that not all individuals donate; therefore, this is adjusted as well.

  • The value of a volunteer hour has been quantified by Independent Sector to be $23.56 per individual per hour. Tripp Umbach utilized this value with the understanding (also from survey research) of the average number of hours faculty, staff and students engage in volunteer activities (estimated 100 hours per year, for 50 percent of the employees and students).


RESEARCH IMPACT DEFINITION

The 2010 impact analysis quantified the total research funding impact of UAB (revenue received as opposed to expenditures for one year) and the impact of that entire “engine.” For the 2017 analysis, research impact was quantified as the annual impact of UAB research expenditures in FY16. The methodology was refined from 2010 to 2017 with the understanding that an institution may have “secured” a certain amount of research funding in one year; however, this funding is generally not all spent in one fiscal year. Therefore, the 2017 analysis looks at the research expenditures that occurred in FY16 to estimate the annual impact of UAB research on the state economy.