Colleges A Major Economic Force

July 26, 2002
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LANSING — According to the Michigan Economic Development Corp., the state’s 15 public universities have a sizeable influence on the state economy.

MEDC recently reported that the state’s higher education institutions contribute about $39 billion each year to Michigan’s financial system.

More importantly, for each dollar the state gives to the operating cost of the universities, Michigan’s economy gets $26 back.

“This is a significant rate of return for a public investment. It demonstrates the unique and powerful role universities play in enhancing the state’s economic vitality,” said Doug Rothwell, MEDC president and CEO.

Accounting for most of the state’s return on investment was that university graduates have higher earnings than non-graduates, a rate expected to grow in the foreseeable future. In addition, the state retains nearly eight of every 10 public college grads.

The return rate, from a study commissioned by the MEDC and the President’s Council of State Universities, included spending by faculty, students and visitors, business spin-offs and other technology transfers.

SRI International used 1999 as the model year, the most recent year of necessary data, to conduct the analysis.

The report concluded that universities had a direct and indirect economic impact for the state of nearly $41 billion in the study year. The state dollars awarded to the 15 colleges that year came to $1.5 billion, leaving Michigan with a net gain of $39 billion.

A few fiscal highlights of the study were:

  • The $39 billion impact from universities was 12.6 percent of the state’s gross product.

  • Universities had a return between $5.50 and $6.50 for each $1 of operating costs.

  • Spending by graduates accounted for 64 percent of the economic impact, while direct university spending (18 percent) and spending by visitors (18 percent) were next.

  • Licensing income from public universities was more than $420,000.

  • Licensing revenue from business start-ups was over $130,000.

The $1.5 billion of state funds was 25 percent of the $6 billion in income the schools received in 1999. Tuition of $1.3 billion accounted for 22 percent, while auxiliary expenses (16%), hospital income (13%), federal grants and contracts (13%) made up much of the rest. Other smaller revenue sources were private gifts and the marketing of university services.

“The results of this first statewide university economic impact study reinforces the value of education to the state and its citizens,” said Glenn Stevens, executive director of the President’s Council.

“In very practical terms, the state realizes a tremendous return on its investments in its state universities.”

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