Sponsored Research At Utah's Research Universites Has a Significant Impact On The State's Economy

December 3, 2009 - EDCUtah

Each year, Utah's three major research universities inject millions of dollars into the local economy via research spending, using grants and contracts from government agencies and private organizations. Much of the money received for sponsored research stays in Utah, creating jobs and rippling through the economy.

"Our research universities are powerful economic engines and the money they receive from grants and contracts for research can have a significant impact on Utah's economy," says EDCUtah President & CEO Jeff Edwards.

Total Research Funding
For the 2008 fiscal year, monies received for sponsored research at the University of Utah (U), Utah State University (USU), and Brigham Young University (BYU) totaled approximately $541 million. The U received approximately $365 million, while USU received $156 million and BYU $26 million. The vast majority of research dollars flowing into the three institutions comes from agencies outside the state, like the National Science Foundation and the National Institutes of Health. More than 60 percent of USU's research funding comes from a diverse portfolio of federal grants and contracts with agencies such as the Departments of Defense, Education, Energy and Agriculture, and from NASA. The USU Space Dynamics Lab garnered more than one third of USU's research funding.

Now, a new study released by the Bureau of Economic and Business Research (BEBR), which is part of the David Eccles School of Business at the University of Utah, shows the significant impact research spending can have on the Utah economy.

"Based on our study findings, every $1 million spent in sponsored research at the University of Utah supports 20 jobs in Utah, generates approximately $849,450 in earnings for Utah workers, contributes $1.4 million in gross state product (GSP), and provides $86,135 in state and local tax revenue," says Senior Research Economist Jan Elise Crispin, who authored the study for the BEBR.

Sponsored research at the U during fiscal year 2008 directly generated 2,920 full-time equivalent jobs, while indirect and induced job creation totaled 4,380, for a total employment impact of 7,300 full-time and part-time jobs in the state. Thus, for every direct job supported by sponsored research, an additional 1.5 jobs are created in other industry sectors, Crispin says.

"When the indirect and induced ripple effects of sponsored research spending are considered, the total annual impact for fiscal year 2008 was $525.3 million in gross state product," Crispin notes. "This includes $268.8 million in direct purchases by the university and $256.4 million generated indirectly. Thus, every dollar in direct spending by the U generates an additional 95 cents in GSP for the State of Utah."

Economic Activity
Crispin points out that in relation to total economic activity in the state, the impacts of the U's sponsored research accounted for slightly more than four-tenths of one percent of both Utah's total employment and total earnings during FY 2008. Furthermore, the $525.3 million impact on the state's GSP represented almost one half of one percent of total state GSP in FY 2008.

The estimated wage bill generated by the U's research spending was $310 million: $169.6 million in direct university payroll and $140.4 million in earnings for workers in other industry sectors. "This represents an earnings multiplier of 1.83, or in other words, for every dollar in earnings paid directly by the U, an additional 83 cents of earnings are generated for workers in other industries," Crispin says.

While they don't have an analysis of research spending like the BEBR study, leaders at USU and BYU say research spending at their institutions has a similar ripple effect on the economy. Brent Miller, vice president for research at USU, says that while his school's level of funding for sponsored research is lower than that of the U, the multiplier effect of research dollars spent locally is probably similar. Gary Reynolds, director of the Office of Research and Creative Activities (ORCA) at BYU, says approximately 90 percent of the institution's research spending stays in the state, primarily supporting faculty, technician and student wages. Approximately 25 percent is spent on student wages alone, he notes.

Research is a defining characteristic of the University of Utah and Utah State University, but less so at Brigham Young University (whose first priority is to be an undergraduate and graduate teaching university). Nonetheless, as the BEBR study shows, research spending contributes to the state's economic base in myriad ways, supporting and creating jobs, increasing earnings for Utah residents, and providing tax revenue for state and local units of government. Furthermore, when the effects of research spending on the economy are combined with that of technology privatization, the economic impact of the three universities is even greater.

"Many technologies developed through the research process have potential commercial applications that lead to the creation of new businesses or the expansion of existing ones. These potential impacts could be substantial, but were beyond the scope of our analysis," Crispin says.

Ned Weinshenker, vice president for strategic ventures and economic development at USU agrees, saying the companies that are developed out of university research generate a significant number of jobs and have a prolonged benefit on the economy.

"University-based research leads to discoveries and inventions that will form future high tech companies in Utah," adds Miller.