For every fact put out by UMass, five fact checkers are kept busy
UMass is banging its drum, loudly. Here’s the opening paragraph in a press release put out on Wednesday:
The University of Massachusetts is one of the state’s largest economic engines, generating $4 billion in economic activity each year, with every $1 of state support helping the university generate more than $8 in positive economic activity, according to a report released today.
The release later reiterates the point:
While the state provides $524 million, or only 26 percent, of UMass’ $2 billion annual operating budget, the university generates $4.3 billion in economic activity.
Here’s what the school’s president says in the introduction of the report:
Measured in dollars, the UMass system is a $2 billion education and innovation enterprise seeded by the Commonwealth’s annual $524 million investment. This $2 billion dynamo spins off an additional $2.3 billion in economic activity in the form of private sector jobs and other spending impacts.
Here’s what the report says:
The $524 million of core state support for the UMass system accounts for 26 percent of the five-campus university’s $2 billion operating budget and helps generate total economic activity that is estimated at $4.3 billion annually due to the multiplier effect of university spending.
That means every $1 of direct state investment helps generate more than $8 in economic activity.
If we reduced state support to $272 million, then “every $1 of direct state investment” would “help” generate more than $16 in economic activity, provided the difference was made up for with correspondingly higher tuition and other fees.
To really believe that each $1 helps generate $8 in economic activity (which, by the way, is something entirely different than an $8 return) you have to assume that the other 74% of UMass expenditure is dead weight with zero economic-multiplier effect - a nonsensical assumption. But it obviously sounds a lot better to “help” generate $8 on the dollar than $2.1 on the dollar, which is what the UMass system actually generates, according to its report.
A footnote lets us know how the economic impact of UMAss was calculated:
The economic impact analysis of the UMass system and its campuses was prepared by the UMass Donahue Institute. The Analysis utilized the IMPLAN modeling system and was based on actual university expenditures during FY 06. For more information on the methods used to prepare this analysis see http://www.massachusetts.edu/econimpact/methodology.html
The Donahue Institute “strives to connect the Commonwealth with the resources of the University, bridging theory and innovation with real world public and private sector applications.” Of course, in this particular instance, its mission seems to be connect the University with the resources of the Commonwealth. What a convenient mission creep.
The economic multiplier effect is an uncontroversial concept, though the actual multiplier can be difficult to estimate. The multiplier basically means that the school’s faculty and staff spend money on groceries and other purchases, and the stores that sell groceries and other items to UMass staff pay their bills in order to stay in business, and that suppliers ship supplies to UMass campuses etc. In short, it doesn’t really tell you a whole lot about the economic worth of the school, only that its money isn’t tossed into a blast furnace.
Harvard University claims it generates $1.7 billion in economic activity and “nearly 17,000 fulltime-equivalent jobs throughout the five-county Boston metropolitan area.” And that’s just the multiplier effect: Add in Havard’s direct spending and the result is that “in 2002, Harvard’s overall economic impact in the region totaled $3.4 billion, and that the University directly and indirectly accounted for more than 33,000 jobs.” Harvard University also used IMPLAN to calculate its economic impact.
In other words, don’t support boosting UMass funding just because its staff buys milk and bread.
