in business activity within the Pocatello economy. Altogether, those four
sources of expenditures represent an economic stimulus of $291.9 million in
private sector business activity within the region.
Table 5: Summary of ISU-induced Local Spending Direct
EffectsIndirect
EffectsTotal
Effects
Students$156.4$56.2$212.6
Faculty/Staff$23.6$6.3$29.9
ISU Institutional Purchases$23.7$9.3$33.0
Visitors to ISU$12.0$4.4$16.4
Total:$215.7$76.2$291.9
Estimated contributions for each source of expenditure are also included in the
table. ISU’s 12,245 students represent the single largest proportion of impacts,
with their household expenditures totaling more than $212 million in area
business activity. The total stimulus of institutional purchases generates
another $33 million, while the households of faculty and staff ($29 million) and
campus visitors ($16 million) generate significant impacts.
During 1996, Bannock County’s 73,379 residents earned $854 million in wage and
salary income, while county establishments conducted $1.2 billion in retail
business sales. Nonretail business added another $2 billion, yielding a gross
county product value of about $3.2 billion. This perspective suggests that about
9% of the area’s economic activity is in some way connected to ISU, with nearly
75% of that amount due to the local spending of ISU students and their
households.
Discounting Local Residents
A significant portion of the University-related expenditures included in Table 5
would likely continue to occur in the absence of the University. Consequently,
it is realistic to discount contributions made by area residents whose
households would be reasonably assumed to maintain comparable contributions to
the local economy if ISU were to cease to exist.
The discounting procedure adopted for purposes of this study involves a
relatively straightforward estimate of the proportion of ISU students, faculty
and staff who would likely remain in the Pocatello area in the absence of the
university. The proportion of institutional purchases and out-of-area visitor
expenditures that would occur in the absence of the university is assumed to be
near zero. Based on a survey of students conducted in conjunction with this
report, an estimated 39% of the $212 million in student household expenditures
would be lost in the absence of the University. A similar survey of faculty and
staff reveals that 80% of faculty and 25% of staff would be lost to the area if
the university were to cease to exist. The prorated proportion of ISU’s
estimated $29.9 million in wage-based local purchases at risk under these
assumptions is $18.5 million.
Table 6: Discounting Area Resident Impacts Gross
Total EffectsExpenditures of
Permanent ResidentsNet
Total Effects
Students$212.6$82.7$129.9
Faculty/Staff$29.9$18.5$11.4
Institutional Purchases$33.0$0.0$33.0
Visitors$16.4$0.0$16.4
Total$291.9$101.2$190.7
A summary of these calculations and assumptions is shown in Table 6. The net
effect of this discounting procedure is to reduce the local impact of Idaho
State University on the area’s economy by about $91 million. Consequently,
$190.7 million in area expenditures remain as directly attributable to ISU’s
presence.
Cost Benefit Analysis
Another way to look at the economic impact of Idaho State University involves
cost-benefit analysis, i.e. a comparison of value returned for investment made.
ISU represents a capital investment on the part of the State of Idaho of $139
million in fixed assets including buildings, property and equipment. Annually
the State of Idaho appropriates about $72 million to fund ISU operations. The
University also receives about $41 million per year from federal sources
(primarily student scholarships and loans), $23 million from student fees and
sales of auxiliary services, and another $13 million from private and other
sources. Altogether, the University operates on annual revenues of $149 million
and an investment in property and equipment of $139 million.
Return on those investments can be measured many different ways, but the one
used here strives to place a value on the educational benefit received by ISU
graduates.
According to a similar assessment conducted by Boise State University3, a 1993
male college student’s lifetime earnings are enhanced by $456,362 over earnings
he would have received with only a high school diploma. Similar estimates are
generated for female graduates, and for recipients of occupational certificates,
academic Associate degrees and Master degrees. Based on the number of each type
of graduate and their gender, the lifetime earnings of ISU’s 2,083 graduates for
the year 1996 are increased by an aggregated $863 million! To realize an
equivalent 40-year return, the initial investment would be valued at $466
million assuming an estimated 3% annual rate of return.
Table 7: 40 Year Estimated Lifetime Earnings Differential for ISU Graduates
Estimated Aggregated Lifetime Earnings Differential
GraduatesAll 1995-96 GraduatesIdaho Resident Graduates
Occupational (VoTech)521$72,961,728$42,242,026
Academic AA17$3,845,089$2,226,158
BA1,047$588,928,485$340,966,875
MA498$197,222,276$114,184,090
Totals2,083$862,957,578$499,619,150
Based on information compiled by ISU’s Office of Alumni Relations, about 58% of
all known graduates of ISU programs reside within the State of Idaho.
Proportionately, Idaho residents realize a lifetime earnings enhancement of $499
million because of their educational attainment, with a present value of
approximately $307 million. This present value is roughly equivalent to the
“human capital” return on ISU’s activity.
In addition to the estimated value of an education received by ISU’s graduates,
the University has been shown (Table 6) to annually stimulate approximately $191
million worth of economic activity within the Pocatello area. Combined, the two
forms of benefits total $498 million.
This total annual benefit of $498 million costs the taxpayers of Idaho about $72
million per year, plus an investment of land, buildings and equipment worth $149
million. If the land and building assets are divided over a five-year period,
the combined annual cost to the State of Idaho for operating Idaho State
University is estimated at $102 million.
Summary
In summary, the State of Idaho’s calculated annual investment of $102 million
realizes an annual return valued at $498 million. This is very close to a
five-to-one return on investment, if the value of the education received is
given an estimated dollar value.
A more conservative estimate of the State of Idaho’s return on its ISU
investment can be calculated by excluding any reference to the value of the
education received by its graduates. The direct and indirect impacts of
institutional purchases, faculty, staff, and student household expenditures,
plus the expenditures of out-of-area visitors and the prorated expenditures for
land, buildings, and equipment totals a previously calculated $191 million.
Those expenditures alone represent an 87% return on the initial $102 million
investment.
The realization of the above rates of return on an ongoing basis, year after
year, testifies to the significant “profitability” of Idaho State University in
addition to its measured economic impact on Pocatello and the State of Idaho.
1INEEL Impacts, US Dept of Energy, Idaho Operations Office, 1997; Idaho Income
Survey, Associated Taxpayers of Idaho, 1992; and Microvision Market Segmentation
System, EquiFax/National Decision Systems, 1998.
2The Economic Impact of Northern Arizona University on Coconino County (1995),
College of Business Administration, Northern Arizona University, 1995; The
University of Virginia’s Impact on the Charlottesville Metropolitan Area, Center
for Public Service, University of Virginia, 1990.
3The Impact of boise State University on the Economy of Idaho, Chuck Skoro,
Department of Economics, Boise State University, 1996.