UI economic impact: Big or bigger?

By The Gazette Editorial Board

Iowans can be grateful that their largest public university is even more than a good place to get a college degree and launch a career. The University of Iowa also offers popular cultural and entertainment events, Big Ten athletics and world-class medical research, teaching and treatment facilities.

So how much economic impact on our state do all those activities, including education, produce?

A consultant firm's study commissioned and trumpeted Thursday by UI officials pegged the total impact at $6 billion for fiscal 2008-09. Pittsburgh-based Tripp Umbach found that UI accounts for 1 of every 30 jobs in Iowa and returns a whopping $15.81 of economic benefits for every $1 of state tax money appropriated to the university. UI is probably the largest single-entity contributor to the Iowa economy.

Impressive numbers.

Whoa there, said David Swenson, economics research scientist at Iowa State University, after he reviewed the report at our request. “The implication that every $1 of tax money sent to the university is magically transformed into these other big-dollar numbers of spending and economic activity is simply not the case. I have serious questions about the overall methodology used ...”

Paul Umbach of Tripp Umbach said the methodology is one his firm has used for dozens of similar studies of other universities and has been widely used for decades.

Umbach told us that his study doesn't actually measure the UI's full economic impact. “We stopped measuring at the point UI stopped spending. It actually underestimates the true power of the UI.” For example, he said, it didn't account for alumni activity or the fact that the UI draws a high number of international and out-of-state students compared to most large research institutions.

Umbach said the study measured direct spending by the university, its employees and visitors, as well as the indirect - the multiplier effect of respending within the local economy by companies that do business with the university.

Swenson disputed the multiplier used. “It was very high. ... The kind of research I do would not find numbers anywhere as large, including that $6 billion.”

Umbach cited a big economic impact from the UI's ability to attract research funds from outside sources - $429.5 million in 2008-09 - as well as from visitors such as hospital patients and families, sports fans and arts patrons - $208.1 million in total expenditures.

Swenson acknowledged the research money is “new productivity” that clearly counts as economic impact. But he was skeptical of the visitor spending figure.

We don't doubt the UI's economic impact is substantial and valuable to Iowa. Even vital. But, in lieu of a national consensus on measuring procedures, Iowans should take the study's results with a few grains of salt.