IOWA Alumni Magazine | December 2010
Giving Back
A new study reveals the UI's crucial role as a magnet to attract money, jobs, people, and other economic resources to the state of Iowa.

When thousands of Penn State fans poured into Iowa City for this year's Homecoming game on October 2, they didn't just bring their school spirit. They also brought their money, with each person splashing out hundreds of dollars on football tickets, hotel rooms, restaurant meals, transportation, and much more.

According to the Iowa City/Coralville Area Convention and Visitors Bureau (CVB), a home Hawkeye football game brings in more than $14.5 million to Johnson County. The economic impact of a seven-game season is more than $100.1 million. Those are impressive figures—and yet they reveal only the tip of the University of Iowa's incredible economic contributions to its home state.

Among the Pennsylvanians traveling to Iowa City that first weekend of October was Paul Umbach. Like many of the Easterners, he stayed at the Marriott Hotel and Conference Center in Coralville's newly developed River Landing district, an up-and-coming, multi-billion-dollar project offering restaurants, offices, residences, museums, and, eventually, a new medical clinic from the University of Iowa Hospitals and Clinics.

Umbach wasn't in Iowa to support the Nittany Lions, though. He made the trek to the Heartland to appear at a press conference announcing a major new study that demonstrates the UI's unparalleled contributions to the Iowa economy.

In 2009, the UI commissioned the Tripp Umbach consultancy, a leading firm that specializes in economic analyses of health care organizations, universities, and academic medical centers, to produce "The University of Iowa Economic Impact Study." The 25-page document, based on data from FY 2008-09, details the many ways in which the university's operations impact Iowa's economy, employment figures, and government revenue.

"The university's No. 1 economic impact is through education, but we're also more than that," says President Sally Mason. "We wanted to quantify our impact on the state economy, and we wanted to do it more systematically than ever before."

Supporting the Economy

The report's key findings revealed the UI to be a leading economic engine, generating about $6 billion a year. That sum represents the $2.6 billion spent directly by the university and its employees, students, and visitors, and the $3.4 billion indirect or "ripple effect" as companies that do business with the UI re-spend the money they receive.

The university directly spends $1.4 billion on capital goods and services annually, while out-of-state students pay nearly $144 million in tuition and produce an economic impact of $380 million.

Overall, $1 out of every $30 in the Iowa economy is supported by the university, a figure that far exceeds the one-in-50 rate Umbach typically sees in economic impact studies. Compared to peer institutions, the UI outperforms both Indiana University and the University of Wisconsin-Madison, which (in separate studies not conducted by Tripp Umbach) reported economic impacts on their states of $4.6 billion and $4.7 billion respectively. As a public institution, the UI also represents a remarkably good investment: for every dollar in state appropriations, the university returns more than $15 in economic impact.

"The University of Iowa's daily operations provide ongoing financial benefits to the state's economy," notes the report. "An institution as vast as the UI is central to the fiscal health and well-being of the state of Iowa. [It] significantly impacts the statewide economy through expenditures, government revenues, and the employment and personal income of residents."

Creating Jobs

As one of the state's largest employers, the UI obviously has a profound impact on creating and sustaining jobs. In fact, the university accounts for the state's largest payroll and supports almost 52,000 jobs. Direct employment comes in the form of some 20,000 faculty, staff, and student jobs, supplemented indirectly by another 32,000 jobs in almost every industry sector, from construction and security to IT and business services. The university community also creates a need for additional employees in government and service areas, such as schools and day care facilities.

A 2003 study by the state of Iowa ranked the UI as the third largest employer, behind Hy-Vee and Walmart, but the Tripp Umbach study revises that standing. "The types of direct jobs provided by the UI are higher paying and provide benefits…and generate a significantly higher indirect multiplier than the retail sector," says the report. "[The] University of Iowa is the largest single contributor to the Iowa economy."

Doing Research

As a key component of the university's mission, research accounted for $429.5 million in sponsored research funds in 2008-09. A recent National Science Foundation survey ranked the UI 20th among all public universities in terms of federal research funding. While the UI ranks 13th for National Institutes of Health awards, its researchers and faculty attract grants from across the spectrum of academic disciplines. "It's like a stock portfolio that's very balanced, with lots of opportunities for growth," says Paul Umbach.

The Tripp Umbach report calculated that UI research accounted for $962.7 million in direct and indirect economic impact. This thriving area also created more than 6,000 direct and indirect jobs, while the commercialization of UI discoveries is expected to yield between $1.4 billion and $2.4 billion over the next decade.

Attracting Visitors

Whether they travel to Iowa as prospective students, health care patients, conference attendees, or ballet lovers, visitors to the university bring millions of dollars of new money into the state. In 2008-09, those visitors spent about $208 million—excluding the multi-million-dollar economic impact of UI athletics. With the UI's international reputation for education and research, many of those visitors travel from other countries. As Paul Umbach notes, "The UI is Iowa's connection to the world."

Paying Taxes

Although the university does not pay state corporate income tax, it contributes to Iowa's tax revenues in other ways. Its employees pay income, sales, and property taxes, while university spending with other companies generates indirect taxes. Those thousands of visitors also pay hotel, fuel, rental car, airport, sales, and parking taxes. Together, that direct and indirect spending results in about $486.9 million in tax revenues from the UI.

"Without the University of Iowa, there would be fewer jobs and less spending in the area," states the economic impact study. "For every $1 in state funding appropriated to the UI, $1.28 in tax revenue is returned to state and local governments.

Benefiting the Community

The UI may generate $6 billion a year in economic impact, but its staff, faculty, and students are also doing their part to contribute to the state of Iowa. In 2009, UIHC provided Iowa residents with more than $232.5 million in uncompensated care. That same year, UI staff, faculty, and students donated some $30 million to local charities, along with volunteer services estimated to be worth around $37 million.

Improving the Quality of Life

While his company's study efficiently broke down the impact of the UI in dollars and pie charts, Paul Umbach admits that it's much harder to quantify the university's many intangible benefits. After all, how do you measure quality of life?

How do you put a dollar amount on the thrill of seeing world-class artists perform at a UI event? How can you measure the personal enrichment provided by a community that attracts different cultures, cuisines, and perspectives? While the value of an Iowa degree may add about 12 percent to a graduate's salary, how does that person quantify the life-enhancing friends and experiences gained at the university?

During their research, Umbach and his colleagues posed this theoretical scenario: imagine that the University of Iowa simply disappeared, along with its staff, students, research, educational programs, and cultural and sporting activities. What would Iowa be like?

It would—in every sense of the word—be a much poorer place.

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