Economic Importance to the New England States

The importance of the New England land-grant universities as economic entities within their states has been formally studied, at least at UMass-Amherst, URI, and UNH. Actually, there is an extensive professional literature, dating back to the 1960s, on the important economic contributions the public universities make to their states. At least five areas of positive influence can be identified, including the following:

1. The universities are economic centers through which money flows into the state economy. Universities function as economic magnets, attracting money from outside the state that is then spent primarily within the state. They derive funds from non-resident students through tuition, fees, and room and board charges that are then spent within the state. Non-resident students and their parents also spend money for restaurants, motels, clothing, recreation, etc. The universities also attract significant amounts of non-state money for student aid and for the support of their research and outreach programs.

Money from non-resident students makes it possible to balance enrollments and offer a wider range of programs to resident students, and lowers the net cost of university operations to the state. Students also provide an important source of intelligent and inexpensive labor to the work force while they pursue their degrees, and they volunteer in large numbers for many community service projects.

2. Teaching is a fundamental mission of the universities. Students who earn a baccalaureate degree today can expect to earn much more in their lifetimes than their counterparts with only a high school diploma. Whether they become small business owners, engineers, health care or social services professionals, teachers, elected officials, or corporate leaders, because so many land-grant university students remain within their states after graduation, they play an important role in the social and economic success of the state.

3. The universities also play an important role in training and retraining the workforce of the states through continuing education and extension courses, special conferences and workshops, and training programs. On-site or near-site corporate education and training is becoming more common, as is program delivery to remote sites though electronic means.

4. The land-grant universities provide technical knowledge and technical assistance to large and small businesses throughout the state. Perhaps the oldest formal program designed for this purpose is cooperative extension, and there are also the agricultural experiment stations, small business development centers, and many other program examples.

5. The universities are creators of businesses through spin-offs from their research programs. Research programs have been growing, and the universities have become much more publicly committed to technology transfer in recent years, seeking disclosures of significant findings and filing patents to make licensure and technology transfer possible.

Stronger collaborative links are also being formed between universities and state agencies having economic concerns: for example, departments of economic, business, and industrial development; agriculture; and environmental protection. When the heads of such agencies concur on objectives, and even support joint proposals to the legislature, a synergy between universities and the state is greatly enhanced.

The Universities as Centers of Economic Activity
I was able to identify three separate reports attempting to quantify the economic activity induced by three of the New England land-grant universities.

In 1972, Geoffrey Booth and Jeffrey Jarrett authored a report on "The Economic Impacts for the University of Rhode Island," that later became the basis for a theoretical paper published in the 1976 volume of the Journal of Higher Education.

In 1990, the University of Massachusetts at Amherst developed an incomplete draft of a report titled "The Regional Economic Impact of the University of Massachusetts at Amherst."

In the same year, Antoinette James and Robert Puth produced a report titled "The Economic Impact of the University of New Hampshire on the Economy of the State." Puth also produced a report for the University System of New Hampshire at about the same time, and that report has been recently updated.

All three of the studies illustrate a positive economic impact on the local economy and the economy of the state. In each case the short-term direct impacts are relatively easy to identify and understand (although not necessarily easy to calculate), while the longer-term ones are more difficult.

According to Booth and Jarrett at URI, direct economic impacts include university-related purchases and expansion of the credit base of the state's banks, as the result of university deposits. Other direct impacts include the number of jobs directly created by the university, as well as additional jobs created in the state as a consequence of university employees as consumers. These authors excluded any long- range impacts, omitting such things as the role of the university in producing or upgrading skilled and professional workers, the contribution of scientific research to the private sector, and the contribution the universities make to the quality of life in the surrounding communities. Nor did Booth and Jarrett deal specifically with funding sources from outside the state, such as non-resident tuition, federal financial aid, or sponsored research dollars.

The UMass Amherst study begins to deal with the economic effect of dollars that come into the state as a consequence of university activities. For example, federal sources contributed about 41 million dollars, approximately 12%, to the UMass Amherst FY 1988 operating budget. They did research on the use of multipliers to estimate the full economic effect of the university payroll and purchases, plus student purchases. Dollars cycle through the economy, and previous research suggests economic multipliers of 1.2 to 2.2 can be justified for university dollar impact, and job multipliers of between 59 and 63 per million dollars of expenditures. In other words, every million dollars in expenditures by the university has between a $1.2 million and a $2.2 million impact on the economy, and creates between 59 and 67 additional jobs. University budgets are in the hundreds of millions of dollars, of course.

The UNH study adds much more detail on the impacts of non-state dollars that result from non-resident tuitions and other non-resident student expenditures. It also adds the dollar impact of funds from federal and other non-state sources. It is intended to be a conservative study, correcting for a number of important variables that reduce the total magnitude of the effect. For example, there are university payroll costs associated with feeding, housing, and offering classes for non- resident students that, in any successful model, must be corrected for. Net inflow of non-New Hampshire funds is calculated, then net cost to the state is subtracted from that amount, to yield an adjusted total of $49.3 million that came into New Hampshire as a consequence of university operations. A dollar multiplier of 1.7 results in an estimate of an $83.8 million impact on the economy of New Hampshire. Similar impacts would be found in the other states, although the appropriate economic multiplier may be expected to vary somewhat.

The Economic Impact of the Universities Through Their Educational Programs

An interesting point at the outset is that the New England land-grant universities do not seem to be in competition with one another for each other's students. Fred Curran, Director of Institutional Studies at UVM, conducted a study of Fall 1991 enrollments to determine the state of residence of the non-resident students at each of the six universities. Total percentage of non-resident students enrolled from the other five New England states ranged from a low of 6.5% at UConn to a high of 28.3% at UNH. The percentages of resident, New England non- resident, and other non-resident students for each of the campuses is as follows:

	Resident %	New England Non-resident %	Other states & Foreign %
UConn	83.5	6.5	8.7
UMaine	79.5	12.5	8.1
UMass Amherst	81.4	4.0	14.6
UNH	60.1	28.3	11.7
URI	56.2	21.8	22.0
UVM	49.7	22.3	27.9

A related point made by James and Puth at UNH is that if there were no flagship public universities, or if the universities became significantly smaller, there could be a serious dollar drain to the states' economies as more resident students were forced to go out of state for their educations. The remaining higher education institutions in most of the states could not hope to accommodate all the students formerly enrolled at the land-grant campuses.

Probably the most direct measure of the economic impact of the college degree is the increase in earning power of people with a baccalaureate degree compared to those with only a high school diploma. Based on data from the 1990 U.S. Census, the American Council on Education reports that the average monthly income of college graduates tends to increase at a faster rate, and in 1990 was double those with only a high school diploma. The average monthly income figures from the 1990 Census were $3,235 for male college graduates versus $1,853 for male high school graduates, and $1,698 for female college graduates versus $943 for their high school counterparts. Similar income gains due to a college degree have been documented for African Americans and Hispanics of both sexes.

Resident students tend to undertake careers and remain in their home states more often than non-resident students. The information below summarizes the number of living alumni from each of the land-grant universities that reside in that state. This gives some suggestion of the long-term benefits that accrue to the states as a result of the baccalaureate, advanced, and professional degree programs at their flagship universities.

	# of living alums	# of living alums residing in state	% living in state
UConn	123,832	80,491	65%
UMaine	65,600	37,039	56%
UMass Amherst	148,404	62,938	42%
UNH	71,000	31,950	45%
URI	64,000	29,300	46%
UVM	65,691	21,625	33%

Summary and Conclusion

The intent of this short paper has been to illuminate rather than define. Precise numbers on current economic impacts can be generated better by others. I have only attempted to summarize some of the bases for the argument that the flagship land-grant campuses in each of the New England states are very important contributors to the states' economies. Through their traditional missions of teaching, research, and service, the universities improve the quality of life, welfare, and economic status of their citizens.

The important and relatively unique roles the universities play in promoting economic development in the state deserves further discussion. These responsibilities are actually not new for the universities; they grow out of the traditional research and service missions. However, important and effective new programs to promote technology development and economic development are in place, and the states are more often joining as partners in these programs. It is important to share this information with one another, so that everyone can benefit.

This paper was originally prepared as background for a joint meeting of the Council of Presidents and the chairs of their university governing boards.

David C. Smith
Council of Presidents New England Land-Grant Universities
11 Brook Way
Durham, NH 03824-3509
Telephone: 603/862-2355
Fax telephone: 603/862-2356
Electronic mail: d.c.smith@unh.edu