Economic Impact Study Demonstrates Value of UW System to State Economy
| Download a summary of Economic Impact of the University of Wisconsin System from UW System Home Page. |
The first-ever economic impact study of the entire University of Wisconsin System details a dynamic financial and social force affecting every region of the state.
The study, directed by Professor William A. Strang, director of the Bureau of Business Research at the UW–Madison School of Business, outlines the economic contributions made by the UW System’s 13 four-year campuses and 13 two-year Centers campuses, as well as the statewide UW-Extension and UW System Administration.
“The significance of this study is enormous,” said UW System President Katharine C. Lyall. “While many UW institutions have completed individual economic-impact surveys over the years, for the first time Wisconsin citizens have the opportunity to understand the positive, pervasive influence of the entire UW System upon our state economy as well as upon the totality of Wisconsin’s quality of life.”
“This study arrives at a time when higher education is often viewed as more a benefit to the individual rather than society as a whole, and therefore somewhat taken for granted in our country,” she said.
Strang, a researcher of Wisconsin’s economy for 31 years and author of five economic impact studies for UW–Madison, said there are two aspects to the study:
Short-term impact — “the dollar flows within the economy that are generated by institution expenditures as well as those of students, employees and visitors.”
Long-term impact – “the economic differences that occur because of the education provided by the institution.”
“While it seems true that Wisconsin citizens have a general understanding that the UW System is important economically to the state, it seems likely that many aren’t aware of the full extent of that impact,” Strang noted in the forward to the report, Economic Impact of the University of Wisconsin System. “That’s not surprising, in that no one has ever tried to quantify the full economic impact of the very large and complex institution that is the UW System.”
Strang and his associates attributed an annual impact of $8.2 billion from the operation of the UW System on Wisconsin’s economy, not including the incomes of UW System graduates.
The $8.2 billion calculation is derived by applying a multiplier effect to the best estimate of all expenditures in the State of Wisconsin directly attributable to the UW System, or $3.5 billion.
Expenditures which total the $3.5 billion are:
- Institutional disbursements;
- Estimated take-home pay of UW System employees;
- Student expenditures;
- Visitor expenditures.
The study notes that only 32 percent of the total UW System budget is derived from state taxes. The remaining 68 percent is realized through tuition, fees, program revenues, federal grants and private gifts and grants. Further, the study notes, the proportion of state tax dollars in the UW System budget fell from 43 percent in 1970-71 to 32 percent in 1995-96.
Major sections of the study included:
The value of a UW System education
“The traditional method of assessing the economic impact of a university or university system is straightforward enough — dollars spent by and within the university enterprise are aggregated and then applied to a local economic multiplier,” the study explains. But ending the analysis at that point “overlooks the UW System’s far more enduring impact as an investment instrument.”
“Rather,” the researchers wrote, “the single largest source of economic value associated with a university system is the educational investment embodied in the graduates.”
Noting that total lifetime earnings of the average UW System graduate increase by $517,000, the researchers pointed out that this higher income yields higher taxes to the state treasury, which more than pay back taxpayer investment.
Magnet for outside resources
An estimated $1.16 billion is brought into the Wisconsin economy through a variety of sources:
- Federal research support – $366 million;
- Non-resident student spending – $287.6 million;
- Non-resident tuition payments – $200.6 million;
- Federal student assistance – $100 million (estimated);
- International student spending – $97.1 million;
- International student tuition payments – $66.9 million;
- Annual out-of-state gifts – $30.7 million;
- External (non-federal) grant support for research – $5.5 million.
Additionally, the researchers point out, outstanding high school graduates of other states are attracted to UW System institutions to continue their educations and many elect to become Wisconsin residents. Their non-resident tuition covers more than their cost of their attendance, resulting in zero state investment in their education.
Economic development
“The research and service activities within the UW System campuses constitute sizable economic development itself,” the study reports. “At any one time, over 10,000 research projects are underway at UW System institutions supported by over $360 million in federal and non-federal grants. This large annual infusion of funds originating from outside Wisconsin supports not only the jobs, supplies and facilities required by research activity, but acts as an incubator to produce future income from the initial ‘seed’ grant.”
The researchers summarize that “… the key to economic development in Wisconsin revolves around the special connection the UW System shares with the state.”
A community and social resource
The study concludes by putting into perspective the interface between economic and social implications:
“The greatest value of a UW System education is what it provides to UW System graduates in their professional development and, in turn, what those graduates offer to society in their careers. In a narrow sense, graduates return more than $3 for every dollar invested in their education through taxes they pay…(but) in a larger sense UW System graduates contribute far beyond what they pay in taxes.
“In the end, people make the difference between the successful and unsuccessful economies. And the UW System plays an important role in developing the productive people who have led Wisconsin’s economy to its present success.”
Collaborating with Strang in the study were project assistants Joan K. Fletcher, David L. Funk and M. Matthew Onofrio of the UW–Madison School of Business; and Ron Heilmann, director of Research Administration, School of Business, UW-Milwaukee; Kay Magadance, senior institutional planner, UW-Eau Claire; and Keith McBee, associate professor of business and economics, UW Center-Marathon County.