Study: UI system makes up 2.2 percent of state's economy

Study: UI system makes up 2.2 percent of state's economy

URBANA — A new economic-impact study commissioned by the University of Illinois concludes that the UI system pumps $17.5 billion into the state economy each year and supports 171,300 jobs — about 2 percent of the statewide total.

The report, to be presented today to UI trustees, says that spending by the three universities in the UI system, their employees and students, and increased earnings by their graduates, account for 2.2 percent of the Illinois gross state product of roughly $820 billion.

The largest share of the $17.5 billion — about $10 billion of it — comes from spending by UI graduates who live and work in Illinois.

The rest comes from spending by the UI system's academic and research operations ($4.9 billion), hospital and health-care operations ($1.5 billion), companies launched through research (nearly $679 million), students (nearly $306 million), and visitors to the universities (nearly $40 million).

The figures include both payroll expenses and the multiplier effects generated by employee and university spending — for supplies, food, gas and the like. But the numbers are also adjusted downward to account for the state and local funding given to the university.

The UI receives about $600 million in general state support, not counting tuition income, special appropriations, capital funding or about $1.7 billion in payments for insurance and benefits for UI employees.

The 171,300 jobs include actual UI employees, both at the system's three universities and its health-care operations, as well as workers at companies launched through its research and those created through spending by UI students, visitors and alumni. That adds up to about one in 46 of the state's 7.8 million jobs. The UI has more than 26,600 faculty and staff members, not counting research and hospital employees.

The UI paid $95,000 for the study by Idaho-based Emsi, an international labor market analytics firm. Founded in 2001 by two economists, the company has completed more than 1,800 similar studies for higher education institutions in the United States, Canada and the United Kingdom, officials said.

The money came from an administrative fund in the UI president's office and did not draw on tuition or state funding, said UI spokesman Tom Hardy.

Justifying the expense, Hardy said the UI relies on funding from taxpayers, donors, students, alumni and others, and it must be able to demonstrate the value of those contributions and the economic impact of the three campuses on the state.

"I am thrilled that our universities continue to have such a dramatic impact on the lives of our students and the fortunes of our state," UI President Tim Killeen said in a prepared statement.

Campus comparison

The Emsi firm performed a similar analysis three years ago, calculating the UI's impact at nearly $14 billion. The 26 percent increase in this year's study is attributed to rising enrollment and the addition of university operations that weren't included in the original 2015 analysis — such as the UI's huge health-care enterprise in Chicago.

Hardy said the new study, based on data from the fiscal year that ended June 30, also includes a breakdown of the economic impact of three UI campuses.

The Urbana campus contributes $8.9 billion to the state's economy, or about 1.1 percent, more than the state's arts, entertainment and recreation industry, the study said. It also supports 88,357 jobs.

Those totals are higher than the other two campuses — $7.6 billion and 73,500 jobs for Chicago, and $834 million and 8,100 jobs for the much smaller Springfield campus.

But students in Chicago and Springfield saw a higher rate of return on their investment.

For every dollar that Urbana students put into their education, they receive $4.70 in career earnings — a 14.5 percent annual return. The average bachelor's degree graduate will earn $30,800 more annually than a high school graduate, netting about $1.4 million more in career earnings.

In Chicago, students received $5.30 in career earnings for every dollar investment, at 16.5 percent annual return, and UI Springfield students received $6.30, a 20.1 percent return.

Emsi economist Hannah Ruffridge, who led the UI study, said one factor in the calculations was students' out-of-pocket costs — tuition, books, fees and supplies — and those are higher at Urbana.

Economists' criticism

The study also considered the opportunity cost — income the students didn't earn while they were studying in college. Urbana students took more credit hours during that year than the other two campuses, meaning less hours available for working. The study also included undergraduates, master's and doctoral students, and Urbana had more students continuing their educations before graduating, she said.

Systemwide, every taxpayer dollar invested in the UI nets $2.40, or a 6.4 percent annual return over the course of students' lifetimes, according to the study.

Some economists have criticized university economic impact studies for overestimating the "multiplier" effect of university-related spending. Ruffridge said the firm combats that with conservative multipliers tied specifically to each industry or area studied. It also measures added income earned by a business from that spending, not just sales figures.

Economic impact studies have also been criticized for underestimating what economic activity would be if the university didn't exist.

"We can't just say all the money they received to generate this impact would disappear," Ruffridge said, because the taxpayers or students who now contribute to the UI would spend that money somewhere else.

"We measure that impact and we net it out," she said.

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