MethodologyImpact on State Business Volume and Government Revenue
The University is the largest single direct employer in the state and, as such, a major generator of personal income for state residents. Businesses operating within Alabama in the wholesale, retail, service, and manufacturing sectors benefit from the direct expenditures of the institution and its faculty, staff, students, and visitors on goods and services. In addition, many of these “direct” expenditures are re-circulated in the economy as recipients of the first-round of income re-spend a portion of this income with other businesses and individuals within the state. This re-spending is termed the “multiplier” or “indirect” effect.
This economic impact analysis measures the effect of both direct and indirect business volume and government revenue impacts. The methodology employed in the calculation of these impacts is 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. Tripp Umbach has previously used the same methodology in Pennsylvania in a multi-campus university study of the impacts of medical schools.
The ACE methodology employs linear cash-flow modeling to track the flow of institution-originated funds through a delineated spatial area. For the UAB impact analysis, computerized spreadsheet models were developed for the University as a whole and for each of the locations of the University, with the models measuring impact on the state economy and government revenues. The figure below shows the general components of the impact models used for the UAB study.
By using this economic impact model, the Tripp Umbach research team has been able to provide UAB with a detailed quantification of the total direct and indirect impact of the University on the economy of Alabama and the Birmingham-Hoover MSA. The impact models provide measures of business volume and state government revenues allocable to the University, together with breakouts of the individual categories of spending that comprise the total impact (e.g. institutional capital spending, student spending, faculty spending, etc.).
The research reported here measures the direct employment impact of the University. In addition, the research quantifies the indirect employment generated at instate businesses by expenditures emanating from the university. An employment multiplier of 2.5 was generated by Tripp Umbach for the UAB project. The multiplier for UAB is comparatively higher due to the large amount of out-of state visitors and research grants and the impact of out-of-state students and their visitors.
As noted above, this research project closely follows the ACE methodology for the performance of impact analysis for a higher education institution. The methodology requires that a university supply detailed information related to expenditure levels and geographic location of expenditures, together with staffing and other related economic information. The main sources of data used in the UAB economic impact study were:
Data Supplied by Individual Departments: The majority of information required for the individual departmental sections of the models and the report was provided by each University department directly. Tripp Umbach developed a customized data collection form which was distributed to each respective department for completion and analysis.
Secondary-Sourced Data: Census data from the economic census, together with Bureau of Labor Statistics information, were required for completion of the models. Tripp Umbach gathered budgetary information from UAB to facilitate the modeling of government revenue impacts allocable to the University. To complete the economic impact models, Tripp Umbach used student, faculty, and staff spending data from primary data and assumptions from other studies completed for similar universities and other recent projects throughout the country.