Some question University's economic impact on Indiana

An IU-commissioned study released last week about the University and IU Health’s economic impact on the state has sparked a debate.

Last Thursday, IU President Michael McRobbie and President and CEO of IU Health Daniel Evans revealed the results of an economic study.

Published in the report “Economic Engine for Indiana: An Economic Impact Analysis,” the results said the partnership generates at least $11.5 billion in economic impact for the state of Indiana and supports nearly 100,000 jobs for Hoosiers. The study is based on information for the 2010-11 fiscal year.

IU commissioned Tripp Umbach, an independent consulting firm, to conduct the study, paying them $75,000.

John Siegfried, professor of economics at Vanderbilt University, has researched university-commissioned studies like the one released last week.

The findings of research conducted by Siegfried and his colleagues will be published in an upcoming report titled “Pitfalls of Traditional Measures of Higher Education’s Role in Economic Development.”

The report questions the integrity of the numbers in results from studies like the one revealed last week, suggesting they are inflated and misleading.

“If these economic impact studies were conducted at the level of accuracy most institutions require of faculty research, their claims of local economic benefits would not be so egregious, and, as a result, trust in and respect for higher education officials would be enhanced,” the report reads.

Paul Umbach, president and founder of Tripp Umbach, said the methods used in its university economic analyses are on par with university research, adding they are some of the most conservative methods in the industry.

“Tripp Umbach uses the same tools academic researchers use, and our studies are held to the same standard,” he said.

“Economists at universities actually review our studies, so there’s no difference between a Tripp Umbach study and a university study.”

The practice of commissioning such reports is common across industries other than higher education, Siegfried’s report said, and universities have been engaging in such practice for decades. Umbach agreed.

Siegfried’s report said money spent on university-commissioned studies could benefit them, because figures conveying an institution’s large benefit on the economy are favorable when competing for state funding or resisting
cutbacks.

Such figures also reflect nicely on the commissioning university, the report said.

Last week, the Indianapolis Star reported that Umbach said such analyses are public relations documents. In an interview Thursday, Umbach said the reports are not, although many public universities use such analyses to communicate their economic impact.

Besides the figures regarding total economic impact and job support in the state, the University’s report cites that for every dollar spent by IU and IU Health, $24.91 is generated for the state of Indiana.

Siegfried’s report said, while that might be true, money of any sort spent in state will, until spent out of state, re-circulate in state.

“A dollar spent by a college or university may eventually create multiple dollars of local economic activity,” Siegfried’s study said. “But a dollar spent golfing or for a seafood buffet does the same.”

Associate Vice President of University Communications Mark Land said the techniques used in the study are standard in the industry and have been used in hundreds of studies, many commissioned by IU’s institutional peers.

“From our end, I can say we hired Tripp Umbach to provide an independent analysis of the economic impact IU and IU Health have on the state of Indiana based on its reputation as a national leader in this type of economic development research,” he said.

Tripp Umbach, during its 25-year history, has produced studies for more than 150 universities, including the Ohio State University and Cornell University.
Umbach said when reports dispute the numbers provided in such analyses, information crucial to the bigger picture is lost.

“Those stories lose the 48,000 jobs and paychecks that go to people, and there’s a loss of billions of fresh dollars that come into Indiana because of the University and IU Health,” he said.

“The facts are very strong and can’t be disputed, and it’s sad they would be lost in a methodological debate.”