Measuring the Economic Impact of UT System and Higher Ed

Both direct and indirect benefits says study

The Quorum Report
Wednesday, March 9, 2005

Investing more in higher education strengthens the Texas economy of today and tomorrow, according to a new report unveiled Wednesday by the University of Texas System.

UT System Chancellor Mark Yudof presented the findings of an economic impact study to chambers of commerce leaders, researchers and reporters in Austin Wednesday lunchtime.

The study shows that the entire System had a $12.8 billion impact on the Texas economy last year. Of this, $8.7 billion was in direct spending and $4.1 billion was through a multiplier effect.

The study found that for every dollar of general revenue the state invests in the UT System for higher education, it ultimately pumps an additional $24 of gross, work-life incremental earnings into the Texas economy. The study also gives an individual breakdown to the impact generated by the UT System's 15 institutions.

"Texas built its early economy on cattle, cotton and oil," Yudof said, in a letter accompanying the report. "Today, the greatest wealth of Texas is not under the ground, growing out of it or grazing its pastures. The wealth of Texas is produced through education and research - developed by the minds that we nurture and the advances they bring about for all of us."

State Demographer Steve Murdock, a member of the expert advisory team, said there is a consistent positive correlation between the percentage of college graduates within a state and the per capita income for that state.

"Education is not a nicety. It's a necessity for the future of Texas," Murdock said. "A more-educated population also results in less stress on social services, higher family incomes and increased purchases of consumer goods. If the enrollment gap were closed, it would increase the state's tax revenue by $21 billion a year."

The economic benefits derived from the UT System were estimated for four categories of expenditure: goods and services for each of the System's 15 institutions, capital purchases and construction, faculty and staff expenditures, and the spending of students who moved to the area to attend school. In a press release, Texas economist Ray Perryman said the study offered a conservative assessment of the overall annual economic impact of the UT System.

The study, conducted by the Institute of Economic Development at UT-San Antonio, showed that investing in higher education brings about long-term economic benefits through the productivity and earnings gains of an educated workforce, new knowledge creation, and market entry of products and services as a by-product of research and investment. That investment also provides a supply of skilled professionals to meet labor market demands, and an improvement in quality of life.

Yudof said the UT System's 15 institutions have a huge employment impact on Texas. On average, for every campus job that exists, 1.5 jobs are added because of institutional related spending, the study found. The combined employment impact of all 15 institutions in their host regions was 215,700 jobs.

The study found that the System's six health institutions add $7.7 billion and 112,200 jobs to their regions. This is approximately 60 percent of the total UT System economic impact. Kenneth Shine, executive vice chancellor for health affairs for the UT System, said the better educated a society is, the more healthier it is likely to be.

Robert McKinley, lead investigator of the study, that although state appropriations represent only about 20 percent of the money UT institutions receive the funding acts as a catalyst for investments by other stakeholders. "With each successive class of new workforce entrants fulfilling their higher potential, and leading our knowledge-based industry growth, Texas can compete and win in the global marketplace," McKinley said.

The study also found that capital expenditures contributed an economic impact of $2 billion to the Texas economy. Capital expenditures support $737 million in personal income and approximately 20,600 jobs.

(c) Copyright March 9, 2005 by Harvey Kronberg,, All rights are reserved