August 15, 2020 by Gwen Burrow
How much will local economies lose if colleges and universities go online this fall? That’s a question that Pullman, Washington, home to Washington State University, is about to find out.
The Wall Street Journal recently featured Emsi in an analysis of the economic impact of COVID shutdowns on college towns. Pullman normally has 20,000 students flooding its streets during the school year. But with WSU moving exclusively online this fall (with rare exceptions) and canceling Cougar football for the first time in over 70 years, that number of students will be far below normal. Student spending will reduce, as will visitor spending on game weekends. Pullman businesses are already struggling in a town that depends on visitors more than anything.
Pullman isn’t the only college town facing a tremendously uncertain year. In just the past few weeks, many colleges across the US have canceled or modified their plans to re-open this fall due to COVID-19. For example, Harvard and UC Berkeley are starting the school year entirely online, while Georgetown, CalTech, and Duke are offering a hybrid: some online, others in person. Brown and Princeton are splitting up or rotating their students. Bottom line, there will hardly be a normal school campus anywhere in the states this fall.
To be sure, shifting to online might be the only safe option, depending on your location. But colleges and universities are vital to their towns’ economies, and the decision to go virtual needs to be made with the lights on—that is, by considering all the angles.
In May, Emsi worked with the Wall Street Journal to measure the economic impact of Virginia Tech, University of Idaho, Oregon State University, and Cornell. In these studies, we discovered that Virginia Tech is responsible for over half of Blacksburg’s economy, generating $1.2 billion in annual income, and one of every two jobs is supported by the university, its students, and its visitors. What happens to Virginia Tech, in other words, happens to Blacksburg.
In our recent research on WSU, we estimate that through its operations spending, visitor spending, and student spending alone, WSU brings $845.1 million to the local economy during a normal year (based on fiscal year 2018-2019) and supports nearly 10,000 jobs.
So how much of WSU’s impact will get slashed this school year? How many jobs will vanish?
While the exact impact remains uncertain, the visitor spending impact could range from $4.3 million at 25% visitor capacity (96 jobs supported) to $8.6 million (192 jobs) at 50% visitor capacity to $13.0 million (289 jobs) at 75% capacity.
We can also model scenarios of how the student spending impact could change. If 25% of students return to Pullman in fall 2020, the student spending impact will decrease to $4.3 million in added income, or 108 jobs supported. This impact increases to $19.0 million (479 jobs) if 50% of students return and to $33.7 million (853 jobs) if 75% of students return.
But exactly how heavy a blow will Pullman’s economy suffer this next year? Only time will tell.
Below are our estimates for the economic impact of WSU. Bear in mind that these numbers are based off of 2018-2019. With in-person classes canceled, and no football, some or all of these impacts will drastically dwindle or even disappear.
WSU promotes economic growth in Pullman* through its direct expenditures and the resulting expenditures of visitors, students, and regional businesses. The university serves as an employer and buyer of goods and services for its day-to-day operations. The university’s reputation and activities attract visitors and students from outside Pullman, whose expenditures benefit regional vendors.
When exploring each of these economic impacts, we consider the following hypothetical question:
How would economic activity change in Pullman if WSU did not exist in FY 2018-19?
Each of the economic impacts should be interpreted according to this hypothetical question. Another way to think about the question is to realize that we measure net impacts, not gross impacts. Gross impacts represent an upper-bound estimate in terms of capturing all activity stemming from the university; however, net impacts reflect a truer measure of economic impact since they demonstrate what would not have existed in the regional economy if not for the university. In other words, as WSU remains online in fall 2020, some or all of these impacts will be drastically reduced or could disappear.
*For the purposes of this analysis, Pullman is comprised of the following zip codes: 99163 and 99164.
WSU adds economic value to Pullman as an employer of regional residents and a large-scale buyer of goods and services. In FY 2018-19, the university employed 6,430 full-time and part-time faculty and staff, 78% of whom lived in Pullman.*
Total payroll at WSU was $676.7 million, much of which was spent in the region for groceries, mortgage and rent payments, dining out, and other household expenses. In addition, the university spent $354.4 million on day-to-day expenses related to facilities, supplies, and professional services.**
WSU’s day-to-day operations spending added $779.3 million in income to the region during the analysis year. This figure represents the university’s payroll, the multiplier effects generated by the in-region spending of the university and its employees, and a downward adjustment to account for funding that the university received from regional sources. The $779.3 million in added income is equivalent to supporting 7,854 jobs in the region.
The $779.3 million in added income represents a normal year at WSU. However, on June 1, 2020, WSU announced an anticipated 15% decrease in state appropriations. While the exact implications on how it will change the university’s operations, and therefore its spending, are still somewhat unknown, we can model the impact of 15% fewer state appropriations being spent in the regional economy. This will amount to a decrease of $45.5 million in added income, or 753 jobs, in Pullman. This means the university’s operations spending impact will also very likely decrease.
*Employee headcounts gathered from WSU’s 2019 Annual Financial Report. The percentage of employees living in Pullman is based on other studies completed by Emsi on similar types of universities and regions.
**WSU spending on payroll and other expenditures gathered from WSU’s 2019 Annual Financial Report.
Tens of thousands of visitors from outside the region were attracted to WSU during the analysis year to attend commencement, sports events, and other activities sponsored by the university.* While in Pullman, visitors spent money for lodging, food, transportation, and other personal expenses. The off-campus expenditures of the university’s out-of-region visitors generated a net impact of $17.3 million in added income for the Pullman economy in FY 2018-19. This $17.3 million in added income is equivalent to supporting 385 jobs.
If WSU is unable to host these events in fall 2020, meaning visitors are not attracted from outside the region, then much of this impact will disappear from the Pullman economy. For example, fewer home football games and fewer tickets up for sale have already been announced. While the exact impact remains uncertain, the visitor spending impact could range from $4.3 million at 25% visitor capacity (96 jobs supported) to $8.6 million (192 jobs) at 50% visitor capacity to $13.0 million (289 jobs) at 75% capacity.
A large percentage of students attending WSU originated from outside the region in FY 2018-19, and some of these students relocated to Pullman to attend WSU.** These students may not have come to the region if the university did not exist. In addition, some in-region students, referred to as retained students, would have left Pullman if not for the existence of WSU. While attending the university, these relocated and retained students spent money on groceries, accommodation, transportation, and other household expenses. This spending generated $48.5 million in added income for the regional economy in FY 2018-19, which supported 1,227 jobs in Pullman.
*Visitor estimates based on previous research conducted for WSU (https://economicdevelopment.wsu.edu/documents/2015/06/wsu-economic-impact.pdf/) and other studies completed by Emsi on similar types of universities and regions.
**The percentage of students originating from outside of Pullman is based on other studies completed by Emsi on similar types of universities and regions.
With WSU remaining online in fall 2020, the student spending impact will likely decrease as fewer students relocate to Pullman to attend the university. While it is still unknown how many students will return to Pullman anyway and those who will stay home, we can model scenarios of how the student spending impact could change. If 25% of students return to Pullman in fall 2020, the student spending impact will decrease to $4.3 million in added income, or 108 jobs supported. This impact increases to $19.0 million (479 jobs) if 50% of students return and to $33.7 million (853 jobs) if 75% of students return.
WSU added $845.1 million in income to the Pullman economy during the analysis year, equal to the sum of the operations spending impact, the visitor spending impact, and the student spending impacts. For context, the $845.1 million impact was equal to approximately 54.2% of the total gross regional product (GRP) of Pullman. In fact, the combined student and visitor spending impact of $65.8 million alone accounts for 4.2% of the Pullman economy. As WSU continues to operate online in fall 2020, a large amount of this impact will likely disappear from the regional economy.
WSU’s total impact can also be expressed in terms of jobs supported. The $845.1 million impact supported 9,466 regional jobs, using the jobs-to-sales ratios specific to each industry in the region. This means that one out of every two jobs in Pullman is supported by the activities of WSU and its students. The combined 1,612 jobs supported from the student and visitor spending impacts alone account for one out of every 13 jobs in Pullman. In addition, the $845.1 million, or 9,466 supported jobs, stemmed from different industry sectors. Among non-education industry sectors, WSU’s spending in the Accommodation & Food Services industry sector supported 1,506 jobs in FY 2018-19. These are impacts that would not have been generated without the university’s presence in Pullman.