Assessment FAQWhat is economic impact?
Economic impact begins when an organization spends money. Economic impact studies measure the direct economic impact of an organization's spending plus additional indirect spending in the economy as a result of direct spending. Economic impact has nothing to do with dollars collected by institutions, their profitability, or even their sustainability, because all operating organizations have a positive economic impact when they spend money and attract spending from outside sources.
In this report, direct economic impact measures the dollars that are generated within the state of Alabama due to the presence of the UAB. This includes not only spending on goods and services with a variety of vendors within the state, and the spending of its staff and visitors, but also the business volume generated by businesses within Alabama that benefit from UAB’s spending. It is important to remember that not all dollars spent by a university remain in its home state. Dollars that “leak” out of the state in the form of purchases from out‐of‐state vendors are not included in the university's economic impact on the state.
The total economic impact in this analysis includes the “multiplier” of spending from companies that do business with UAB. Support businesses may include lodging establishments, restaurants, construction firms, vendors, temporary agencies, etc. Spending multipliers attempt to estimate the ripple effect in the state economy where the spending occurs. For example: Spending by UAB with local vendors provides these vendors with additional dollars that they re‐spend in the local economy, causing a “multiplier effect.”
What multipliers were used in this study?
Tripp Umbach uses economic impact (also referred to as business volume impact) multipliers recommended by the American Council on Education. The indirect impacts represent the re‐spending which takes place in the study areas. The multipliers utilized in this study are based upon research conducted by Caffrey and Isaacs in 1971, and are appropriate for major research universities.
Economic Impact Multipliers: State business volume multiplier = 2.3. Birmingham-Hoover MSA business volume multiplier = 1.8
What methodology was used in this study?
The methodology employed in the calculation of the impact of UAB was derived from the standard set of impact research tools developed by the American Council on Education (ACE) for the measurement of college and university economic impact. The ACE‐based methodology is well‐established, having been used in hundreds of impact studies throughout the United States. The ACE methodology employs linear cash‐flow modeling to track the flow of institution‐originated funds through a delineated spatial area.
What is employment impact?
Employment impact measures the direct employment (staff, faculty, administration) plus additional employment created in the economy as a result of the economic impact of UAB.
Indirect employment impact refers to other employees throughout the region that exist because of UAB’s economic impact. In other words, jobs related to the population ‐‐ city services (police, fire), employees at local hotels and restaurants, clerks at local retail establishments, residents employed by vendors used by UAB.
The approximate ratio of direct to indirect state employment for UAB is 1 to 2.5. This is a much stronger ratio that other industries, which is typically 1 indirect job for every 1 direct job.
How is the tourism impact of an institution measured?
Universities are by nature major tourism destinations. Students, faculty and staff visit universities on a regular basis for conferences and meetings. Parents and friends visit students frequently and the general public travels to universities for sporting events, concerts and cultural events. The economic impact models created by Tripp Umbach for UAB calculate the net impact of spending within the state of Alabama from visitors from outside of the state. The tourism impact of a major university represents hundreds of millions of dollars annually in the flow of “fresh” dollars, dollars attracted from out‐of‐state, into the state's economy. The models do not include spending by visitors within Alabama who travel to UAB.
What is the difference between direct and indirect taxes?
Direct tax dollars include sales taxes and net corporate income taxes paid directly by the institution to the state, while indirect taxes include taxes paid to the state by vendors that do business with UAB.
Is this a one‐time impact or does the impact repeat each year?
The results presented in the UAB economic impact study are generated on an annual basis. The economic impact in future years can either be higher or lower based on number of students, capital expansion, increases in external research, and/or state appropriations.
What types of economic impacts are typically presented in a comprehensive economic impact report?
There are three standard measures that institutions use when measuring and communicating their economic impact:
- Direct spending: How many direct dollars spent annually by the university, its employees and its visitors that remain in the state of Alabama.
- Indirect spending: How many direct dollars are spent annually by businesses that receive money from UAB within the state of Alabama.
- Induced impacts: How many direct dollars are spent annually as a result of the products and services provided by an organization. One example is the capitalization of research innovation. Induced economic impact occurs when new products are developed based on research conducted at UAB.
Tripp Umbach is the national leader in providing economic impact analysis to leading health care organizations, universities and academic medical centers. We have completed more than 150 economic impact studies over the past 20 years for clients such as The Pennsylvania State University, The Ohio State University, The University of Iowa, The University of Washington, Mayo Clinic Rochester, Cleveland Clinic, University of Florida Shands HealthCare, the University of North Carolina Hospitals, the University of Pennsylvania Medical Center, the University of Pittsburgh Medical Center, and the Ohio State University Medical Center.
Tripp Umbach recently finished the fourth national study of all 125 medical schools and 400 teaching hospital affiliates for the Association of American Medical Colleges. Tripp Umbach has completed statewide studies for multiple institutions in Ohio, New York, Pennsylvania, Virginia, South Carolina, Wisconsin, and Minnesota. Finally, our firm has completed economic impact studies at the metropolitan level in Boston, Pittsburgh, Philadelphia, and Chicago.