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The Texas economy: the economic impact of the University of Texas at Austin.

Direct expenditures of over a billion dollars per year from the University of Texas at Austin account for almost 9 percent of economic activity in the Austin metropolitan statistical area (MSA), and the university's employees account for more than 5 percent of the work force. In addition to its direct employment and expenditure impact, UT Austin creates an indirect impact as itS expenditures circulate through the economy. We estimate the university's direct expenditures induce about three billion dollars per year of additional income in the Austin MSA. The direct expenditures include money sPent by the university as wen as money spent by the students themselves.

Direct University Spending

The university's 1989-90 budget shows expenditures of $656 million. Education being the university's purpose, it is no surprise that the bulk of UT Austin's direct expenditures, $371 million, went to general operations"' paying instructional salaries and keeping things running on campus.

The next largest budget category was sponsored research. Sponsored research projects are performed by such entities as the Center for Electromechanics and the Bureau of Engineering Research. Revenue to the university may total in the millions of dollars for a single research project. More often, the projects are small-scale, applied research funded by the federal or state government and private enterprise. all together, sponsored research accounted for $127 million of the budget.

Almost $100 million of the budget came from auxiliary operations, which include entertainment and sporting events, housing and food services, the student health center, and publishing enterprises.

Student Spending

The students' expenditures account for about $350 million per year. The estimate of their spending is based on their number and the average amount spent by each one. The data in the table are for the 1989-90 school year-the amount in future years will depend on the enrollment policy. Enrollment has been fairly stable at about 50,000 for the last few years.)

The $715 monthly expenditure excludes tuition; its effect was noted in the budget of the university. The expenditure data, provided by the Office of Student Financial Aid, represent the base budget of an undergraduate living off campus. Some students probably spend a lot more, so our estimate of total student spending is somewhat understated.

Indirect impacts

Estimates of the economic impact of a change involve two impacts. The direct impact includes the direct expenditures of the university and students. The indirect impact is the secondary expenditure that is induced by the direct expenditures. For example, suppose the university raised faculty salaries by one million dollars, faculty-wide. The million dollars is the direct expenditure. When the faculty members spend their additional income in Austin, part of that minion dollars will become income to someone else. When that person, in turn, spends part of the money in Austin, it will become income for still another person. The process could repeat forever, except that some of the money will be spent out of the Austin area, and some will be saved.

The circulation of die initial, direct expenditure through the economy ultimately results in changes to the income of all households and industries. These changes are often estimated using an "input-output" model. Most states rely on the U.S. version of the model, but Texas is lucky to have its own model to describe its unique economy. Originally developed by the Texas Department of Water Resources, the Texas input-output model is now being maintained by the Texas Comptroller of Public Accounts.

Input-output analysis depicts the interaction of the industries in the economy in such a way that indirect impacts can be computed from the direct impacts by using a multiplier." Each input-output industry has its own multiplier, which is calculated from past data on interindustry flows of funds. The University of Texas at Austin is in die "state education" industry, and, according to the multiplier supplied by the Comptroller's office, for every dollar of goods spent by this industry, $2.93 of income will be generated. Based on the multiplier, the direct expenditures from UT Austin and students, some $1.01 billion, generate $2.96 billion in the Austin economy.

Other Benefits for Austin

Because university expenditures are largely independent of the ups and downs of the economy, the university's presence imparts stability to the local economy. Austin was largely buffered from the brunt of the oil price collapse because spending from the university and state government continued to increase throughout die period.

In contrast to the direct and indirect financial impacts, UT Austin produces other positive effects that are not so easily measured. The university contributes both to the intellectual atmosphere and to the economic development of Austin. The presence of a large research institution and the availability of well-trained university graduates enhances the city's ability to recruit firms in high paying industries. Such positive impacts, though less tangible, represent yet another important link between the university and the community.
 Major Centers for Sponsored Research
 at UT Austin, 1989-90
 Center Expenditures
 (in millions of dollars)
 Applied Research Laboratories 28.1
 Center for Electromechanics 10.2
 Bureau of Economic Geology 6.8
 Bureau of Engineering Research 5.8
 Fusion Research Center 3.7
 Institute for Geophysics 3.3
 Center for Energy Studies 2.5
 Institute for Fusion Studies 1.6
 Construction Industry Institute 1.5
COPYRIGHT 1990 University of Texas at Austin, Bureau of Business Research
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Austin, Texas
Author:Olson, Jerry
Publication:Texas Business Review
Date:Oct 1, 1990
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