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The Economic Contributions of Northern Arizona University to the State of Arizona in 2003

November 2003

Prepared by: Ronald J. Gunderson, Ph.D. John D. Eastwood, M.S. Wayne R. Fox, M.S. Bank One Center for Business Outreach College of Business Administration Northern Arizona University Box 15066 Flagstaff, Arizona 86011-5066

The Economic Contributions of Northern Arizona University to the State of Arizona In 2003

John D. Eastwood, Wayne R. Fox, and Ronald J. Gunderson

Executive Summary

This study estimates the economic contributions of Northern Arizona University (NAU) to the State of Arizona for fiscal year 2003. Separate models were developed to demonstrate the economic impact of NAU on the entire state as well as the impacts on Coconino, Maricopa and Yuma counties, and on the Balance of State (the remaining twelve counties.) The Minnesota IMPLAN Group model was used to measure the economic impacts analyzed in this report. This widely acclaimed model provides measures for both the direct impact and the ensuing multiplier impacts resulting from NAU operations. This study contains information on the total expenditures, employment, employee compensation and personal income associated with NAU operations throughout the state. The total impact is further divided to show the individual contributions arising from the following five subgroups related to NAU activities: University (including employees), students, visitors to campus, NAU retirees, and NAU graduates in fiscal 2003. Total expenditure in 2003 by all parties related to NAU exceeded $911 million. The direct expenditure by these groups was $535 million while the remaining $376 million is the result of indirect and induced expenditures associated with the multiplier. This suggests that for each $1000 of spending that occurs to directly support NAU, an additional $700 is spent elsewhere within the state as a result of the multiplier impacts on the economy. Overall, these numbers are conservative since they do not include intangible impacts such as businesses that locate within the region simply because the university is also here, nor do they include the benefits that emanate from scientific discovery or research. The total spending impact in Coconino County was $610 million. The impact in Maricopa County was $71 million. In Yuma, the impact was almost $15 million, and in the Balance of State, this impact was just under $74 million. Total employment generated in Arizona by NAU and all its affiliated activities during this year was 12,542 positions (full-time equivalent). Of this amount 8,287 persons made up the direct employment, and the remaining 4,254 positions are due to the multiplier. This suggests that for each 100 persons employed by NAU and other entities as a direct result of NAU's operations, another 51 positions are also created due to the multiplier effects on the State's economy.

On a county-by-county basis, the total number of positions created in support of NAU's presence was 8,902 in Coconino, 1,173 in Maricopa, 259 in Yuma and 1,419 in the Balance of State. These numbers include both the direct employment at NAU as well as the new jobs generated through the multiplier in each county. Direct spending by NAU and its employees in 2003 was just over $279 million. Of this amount, $265 million was spent in Coconino County. Direct spending by NAU students were $169 million. Of this amount, almost $108 million was spent in Coconino County. Direct spending by visitors to NAU campuses and to students, were $41 million. Over $39 million of this amount occurred in Coconino County. Direct spending by NAU retirees who currently reside within Arizona exceeded $16.8 million. Expenditures by NAU retirees residing in Coconino County were $8.7 million. Students who receive their degrees at NAU earn incremental income above and beyond what they would earn if they had not completed these degrees. The spending associated with the incremental income earned each year by those alumni who continue to reside in Arizona after graduation also contributes to the expenditure impact on Arizona and its counties. The direct expenditures resulting from the incremental income earned by last year's graduates were estimated to exceed $28.6 million statewide including $4.8 million by those alums who remained in Coconino County. Direct employment associated with NAU accounts for almost 10.4% of total employment in Coconino County. This figure increases to 14.4% once the multiplier impacts are included. Directly or indirectly, one of every seven jobs in the county exists due to NAU's presence. The NAU impact statewide that can be attributed to sponsored research grants and projects occurring during 2003 was almost $84 million dollars. After accounting for the multiplier and other effects, this research activity was also responsible for employing 1,169 persons directly at NAU and elsewhere throughout the State. Almost $155 million in tax revenues were collected during the period from households and businesses that were impacted by NAU operations and the expenditure by other groups included in this study. This generated a net fiscal gain of over $109 million dollars to the federal government and over $34 million to Arizona and local governments when all the revenues and costs are included. Future construction planned by NAU in the FY 2004 ? FY 2009 period is expected to add an additional $149 million in expenditures over the six years, and generate an average of an additional 189 jobs per year. Once the multipliers are factored in, these impacts will increase to $255 million in expenditures over this period with 384 new jobs each year. The lifetime earnings differential above a high school graduate for all NAU graduates presently living in Arizona is almost $22.4 billion dollars. An NAU graduate with a bachelor's degree can expect to earn $500,000 more than a high school graduate.

Acknowledgements The preparation of this study would not be possible without the assistance of numerous individuals from within the University and throughout the state. The authors would like to thank the many individuals who provided information needed in order to determine the impacts generated by the IMPLAN model used for this project. Among the individuals from the NAU community who deserve special thanks include Patricia Haeuser, Josh Allen, Karen Appleby, Diane Verkest, Carl Fox, Jeanette Baker, Kent Haslam along with others who provided valuable information. We also wish to recognize Bryan Short who coordinated the information solicitations among the campus units. We are grateful to Theresa Stacy-Ryan, CBA Graphic Designer, who provided valued assistance all along and who produced the final report.

Prepared by: Bank One Center for Business Outreach Wayne R. Fox, Director Ronald J. Gunderson, Principal Investigator John D. Eastwood, Principal Investigator

The Economic Contributions of Northern Arizona University to the State of Arizona In 2003

John D. Eastwood, Wayne R. Fox, and Ronald J. Gunderson Introduction This study measures the economic contributions of Northern Arizona University to the State of Arizona as well as the separate contributions made to Coconino, Maricopa and Yuma Counties and to the Balance of State (the remaining twelve counties) for Fiscal year 2003. Universities such as Northern Arizona University (NAU) serve as centers for learning and research, but are also major contributors to the economic development of the regions where they exist. The economic well-being of the residents of Flagstaff and other communities throughout Arizona is enhanced by the purchases of goods and services and the number of jobs created as a result of the daily activities on NAU's campuses. The influx of outside monies and the ongoing research and development activities also contribute to an enhanced quality of life for Arizona citizens. Thus it is important from time to time for the university to quantify its impacts in order to provide a measure of the return on the investment of public funds spent in support of higher education. Previous studies have been performed to measure the impact of NAU on Flagstaff and Coconino County; however, this study is the first to measure these contributions on a statewide level. NAU's unique role as a provider of education throughout Arizona also means that its impact will occur over the entire state as well. Therefore, separate models were produced to demonstrate the impacts occurring on several distinct regions within Arizona as well as on the state overall. In this study, we isolate the quantifiable impacts of the operational expenditures of NAU. We examine the impact of the annual operations and construction spending at NAU, as well as the impacts resulting from the expenditures by employees, students, visitors to the campuses, retirees and alumni. The overall impact on the state and on each local economy greatly exceeds the initial impact created by the direct expenditures described above. As these dollars are spent and re-spent within each county, a multiplier effect is created which generates additional dollars in the local economies. Therefore, two sets of impacts are provided ? the direct or initial impacts, and the total or overall impacts. We also estimate the number of jobs created in each location as well as the amount of wages, salaries and personal income generated as a result of these activities in fiscal 2003. The study examines only the monetary effects of these expenditures. The full impact of NAU extends far beyond the dollars and cents associated with daily spending activities; however, the non-monetary impacts are typically omitted in studies of this type as they are difficult to assess.

We do not estimate, for example, the dollar value that is associated with the increased level of cultural and sporting activities that occur in Flagstaff due to the presence of the university. Furthermore, the population of northern Arizona is also influenced by the presence of Northern Arizona University. Migration of residents and businesses into the area is due, in part, to the existence of NAU and the job opportunities and research opportunities associated with such a large employer. This study begins with a history of NAU's changing role in providing higher education services to the residents of Arizona. This is followed by a description of the methodology employed to measure the expenditure, employment, and income impacts associated with the university presence. We include sections on the impacts of alumni and retirees in addition to the traditional impacts associated with spending by employees, students and visitors. The final section of the study examines the fiscal impact that NAU and its activities exert on the budgets of all governments -- federal, state and local. We provide tables that show the number of dollars collected by each type of government as a result of the spending and re-spending that occurs from NAU activities. In addition, we contrast the additional costs with the additional benefits generated by the same set of activities. History of Northern Arizona University NAU's history spans 105 years. In 1899, the Arizona Territorial Legislature established the forerunner of Northern Arizona University (NAU). Twenty-three students were enrolled in the first class at the Northern Arizona Normal School in September 1899. Growth of the Normal School, both in enrollment and in its importance to the State, eventually led to changes in the institution's status and name. In 1925, the state legislature changed the school's status to that of a four-year degree-conferring college and authorized the initial Bachelor of Education degree program. In the same year, the name of the school was changed to Northern Arizona State Teachers College, and in 1929, the name was changed once again to Arizona State Teachers College at Flagstaff. In 1937, the legislature authorized the first Master of Arts in Education program. In 1945 the school's name was changed to Arizona State College at Flagstaff. The Bachelor of Science in Forestry was authorized in 1958. Arizona State College became Northern Arizona University on May 1, 1966. Two years later, the Arizona Board of Regents approved the authorization of the first doctoral programs at NAU in the areas of Biological Science and in Education. Northern Arizona University's role in higher education in Arizona has expanded in numerous ways since becoming a university in 1966. During fiscal 2003, NAU enrolled over 19,000 students and offered programs to students in locations throughout the state as well as on the World Wide Web. NAU's influence is not confined to the classroom. Faculty and staff make significant contributions to community and public service across the state. The citizens of Arizona benefit from ongoing initiatives in education, ecological research, technology, business, nursing and hotel/restaurant management as well as from outreach activity through university centers and institutes. These include conferences and seminars, as well as a significant and growing importance of externally funded research conducted by university faculty.

The NAU main campus (The Mountain Campus) is located on approximately 740 acres of land in Flagstaff, Arizona. The existing buildings and physical infrastructure of the Flagstaff campus have a current replacement value of $783 million. The university also operates a campus in Yuma in concert with Arizona Western College. The replacement value of building and physical property in Yuma is $7.6 million. An additional $1.7 million may also be attributed to NAU buildings and physical property in Kingman. Students can also enroll at one of over thirty NAU Statewide campuses as part of NAU Distance Learning programs, or students can enroll in the NAU Worldwide Campus and take their classes and earn their degrees online. Currently, NAU offers its programs through the following academic units: College of Arts and Sciences College of Business Administration College of Engineering and Technology College of Education College of Fine Arts College of Health Professions College of Social and Behavioral Sciences School of Communication School of Hotel and Restaurant Management School of Forestry Graduate College During the 2002-2003 fiscal year, NAU enrolled students from all 50 states and 75 countries. In the Fall 2002 semester, 17,101 students were from Arizona and 2,806 were from regions outside Arizona, including 351 international students. Furthermore, NAU's International Office provides opportunities for students to study abroad in 25 countries. In FY 2003, 320 NAU students studied in countries from Australia to Switzerland. NAU offers Bachelor's degrees in 108 disciplines, as well as 44 Masters' offerings and 9 doctoral programs. Students also increase their educational experiences through participation in internships, field work and cooperative education programs offered through the university. Since graduating its first students in 1901, 94,018 students have graduated from Northern Arizona University. Many of these alumni continue to participate in university-sponsored noncredit courses and other programs and conferences in Flagstaff and throughout the state. In addition, residents of Flagstaff along with university students and employees have become accustomed to enjoying NAU events and activities including recitals, plays and concerts, music and art exhibits, Big Sky athletic programs, and KNAU, the university's public radio station. The NAU library is named for distinguished alumni and long time residents of Flagstaff ? Platt and Barbara Cline. The present facility contains over 200,000 square feet including a four

hundred seat assembly hall. The Cline Library houses over 1,400,000 volumes, including 560,000 books; 240,000 government documents; 35,000 maps; 373,000 microforms; 18,000 sound recordings; 10,000 videos, films and other non-print media; and 136,000 bound periodical volumes. The Role of Universities in Economic Development Faculty members at universities are responsible for generating significant numbers of ideas and concepts that have been adopted by economic developers across the nation. Examples include business incubators and research parks where universities have increasingly assumed a leadership role in providing technical assistance to businesses as well as instituting applied research and facilitating technology transfer to enhance economic development in local communities. Over time, the missions of NAU and other universities have evolved to include activities to promote economic growth within the state. Consequently, NAU is an active participant in the promotion of economic development across Arizona. Faculty members working at NAU provide leadership at both national and state levels in fields as diverse as natural resource and conservation efforts, tourism research and Native American and rural policy programs and initiatives. In November 2000, Arizona voters passed Proposition 301 that included a 0.6 cent increase in the state sales tax to establish the Technology and Research Initiative Fund (TRIF). Monies from this fund are being used to promote university research, development, and technology transfer to the New Economy along with establishing programs that will prepare students to contribute to Arizona's high technology industries. At Northern Arizona University, TRIF funds are presently used for "environmental research, development and education to accelerate Arizona's environmental business enterprises, and e-learning initiatives to address the teacher and nursing shortages and to educate engineers and information technology professionals, among others." (Arizona Statewide Economic Study, 2002). Although universities are becoming more actively engaged in statewide economic activities, the share of state appropriations accruing to higher education has been diminishing in many states. Arizona is no exception. Figure 1 shows the changes in the percent of statewide funding that have occurred for the major agencies in Arizona in the ten years between 1993 and 2003. During this period, the share of state-appropriated funds flowing to higher education in Arizona declined from 14.6% to 12.7% of the state's total general funds budget.

Figure 1

Agency Share of General Fund

50 45 40 % of GF 35 30 25 20 15 10 5 0 AHCCCS Univ DHS K-12 DES Other DO C

14.6 12.7 12.9 11.1 6.9 12.9 12.8 9.4 9.8 7.1 5.2 4.8 42.2 37.8

FY 1993

FY 2003

Source: http://www.azleg.state.az.us/jlbc/03app/gfspend.pdf

Measuring the Economic Impacts of a University The traditional approach used to estimate the economic impact of a university is to measure the dollar impact of the additional economic activities which accrue to a region but which would then disappear if the university were to close down or if the university were not located in that area. Economic impacts occur whenever the university spends dollars for capital and operations items. In addition, spending by university employees and students, as well as by visitors to the campus, also contributes to the impact. In this study, we have also included spending that was made by NAU retirees and by NAU alumni for the most recent year. The entire local economy would be negatively influenced if these expenditures were to end. For example, receipts at local hotels and other lodging facilities would decline with the reduction of out-of-town visitors to the campus and to its students. Local restaurant and entertainment enterprises would also feel the negative impacts. Banking, insurance and other business and personal services firms would experience a reduction in their sales and service activities. The closure of a university also impacts the region's supply of available labor. Many businesses depend on university students and employees as primary sources of labor and technical expertise. The decreased availability of student workers and interns would increase operating costs for local firms when they were compelled to increase wages to replace relatively inexpensive laborers with more expensive workers.

A host of quality-of-life activities are also associated with a university, and these will be negatively impacted if the university were to close. Most obvious, perhaps are the athletic and cultural events held at university locations. Local public radio programming would disappear, numerous seminars and workshops conducted by university personnel would decline, and the overall physical and cultural infrastructure of the region typically shrinks in a smaller environment. The Multiplier Effect When the level of direct expenditures increases in a region, these dollars are spent and re-spent in the local economy, creating additional incomes and jobs. This generates a magnified impact on the region called the "multiplier." The process also works in reverse when the level of expenditure in an area declines instead of increases. In these instances, the reduced levels of spending generate additional cutbacks elsewhere in the region as well as further reduce employment. This begins a negative chain of events that result in a multiple decline in local economic activity. The value of the multiplier varies based upon the amount of spending and re-spending that exists within each community. Therefore, every location has its own multiplier. For example, if a local area has a multiplier of 2.00, a million dollars of direct spending in that area will generate an additional $1 million in spending, and the total impact on the area will be $2 million. Underestimation of the Overall Impact This approach to measuring impacts focuses only on the amount of spending that is attributed to the presence of the university in a region. As such, the true impact of the university on the local economy is underestimated. As an example, the existence of a university may increase home values in an area. Rental costs for local houses and apartments may rise due to the higher demand resulting from the presence of hundreds or thousands of students and faculty who live in the area because of the university. Although the impacts of higher housing costs are not measured by the model, the demand for housing exhibited by these residents, particularly in the areas adjacent to the university, is very often responsible for the elevated cost of housing in many university towns. The typical economic impact model also ignores the benefits arising from the discovery and application of significant scientific and technological research outcomes stemming from faculty and student activities. These outcomes can greatly influence the life and well-being of millions of citizens, yet the direct tie-in to the university is often too nebulous to permit an analysis that measures the cause and effect of these activities. Furthermore, we have not considered enhancements and improvements in the local community resulting from the increase in worker productivity associated with completing a college degree, nor the general attractiveness of a region as a desirable place to work and live due to the presence of the university in the area. While these factors impact local living conditions, their measurement is extremely difficult and their impacts are not incorporated into this study.

Costs vs. Benefits of a University Although a university brings numerous and significant benefits to a local area, that region also incurs increased costs due to the university's presence in the region. One example of these costs is the revenue foregone from tax-exempt property owned by the university. Since the land and infrastructure occupied by most state universities is removed from the local tax rolls, the assessment on remaining property in the region is likely to be higher to make up for lost revenues. A lack of adequate levels of parking and increased congestion in and around the university often occurs. Additional costs are imposed on the city water and sewer infrastructure, as well as increased levels of crime and the cost of enhanced police and fire forces needed for protection. The increased rental costs in the region were already mentioned above. Finally, local school systems are often impacted due to the enrollment of the school-age children of university employees and students. However, any large-scale level of economic activity will impose similar costs on a community, and these items must be considered as part of the overall cost-benefit picture that emerges in a growing community. The following section describes the methodology employed to estimate the economic impact of Northern Arizona University on the State of Arizona and the local communities where NAU provides educational opportunities. Methodology The period of analysis for this study is the 2003 Fiscal Year which began July 1, 2002 and ended on June 30, 2003. The output, income, jobs and tax impacts associated with the activities of NAU are presented for the entire state as well as for Coconino, Maricopa and Yuma counties and for the remaining twelve counties which are referred to in this study as the Balance of the State. The specific model used for this study was developed in 1985 by the Minnesota IMPLAN Group Inc. IMPLAN refers to IMpact Analysis for PLANning. The model employs a sophisticated computer program which adapts the national input-output tables to county and state levels. This procedure permits computations generated for the national economy to be uniquely broken out and designed for use at state and local levels. The smallest geographic region that IMPLAN uses is at the county level. Therefore, the local region is synonymous with the county. In this analysis, we estimate the impact of NAU at the state level, but we also provide the impacts on selected Arizona counties since NAU activities are present in numerous Arizona locations. The IMPLAN methodology estimates the impacts on a state or county that stem from a given event or the elimination of a set of economic activities. The model therefore analyzes impacts resulting from the changes in demand that would occur if NAU were to cease to exist. The model is discussed in detail in Appendix B at the conclusion of this report. Input-output models identify three distinct effects on the region ? direct, indirect and induced ? and the magnitudes of these impacts are the same size regardless of whether the initial change in spending is positive or negative. Only the direction of the change will vary. The impacts are primarily grouped into output, income, employment and tax arenas. The magnitude of the

impact in each community is a function of university spending in the region as well as expenditures made by NAU employees, students, visitors to the university and others associated with NAU. When NAU or its students, employees, visitors and others related to NAU increase their spending, this action is called the direct effect. These expenditures immediately increase local sales activity and generate increases in local employment and income levels. This increase in demand for local inputs generates a ripple or multiplier effect in the local economy. This action is the indirect effect, which occurs when local businesses gear up to replace and expand the level of these inputs. To meet these demands, the firms must also increase their purchase of inputs from other producers, some of whom may be local. As a result, those producers must also increase hiring of labor inputs required to produce the desired goods and services. The chain of events does not stop here. Increases in employment resulting from higher direct and indirect spending will increase the incomes of local households. These households, in turn, will spend a portion of their new incomes in the local economy. This spending stimulates even more demand for output and creates additional employment opportunities in the local region. This tertiary increase in economic activity is the induced effect, and is a reflection of the changes that occur due to higher household incomes in a region. Therefore, the total effect of changes in spending by the university or anyone associated with NAU, will be the sum of the direct, indirect, and induced effects described above. The proprietors' income and the wages and salaries flowing to employees in the affected businesses provide a measure of the income effect. The employment effect is gauged by the number of jobs that exist as a result of the increased initial sales activities and the higher business-to-business transactions that occur to meet the demands of increased economic activity in the state and counties. The tax impact is a measure of the fiscal change resulting from the operations at NAU. The tax impact is shown for the Arizona state government as well as for various counties that are influenced by NAU's presence. IMPLAN recognizes that a portion of the expenditures resulting from changes in demand in any given region will occur outside the physical boundaries of that region. This effect is called leakage, and refers to the impacts felt in areas outside the region being measured. Therefore, the leakage must be subtracted from the local budget in order to provide an accurate measure of the total impact. To demonstrate this point, assume NAU Transportation Services purchases gasoline from local distributors in order to operate its fleet of State-owned vehicles. Only a portion of the proceeds from these gasoline sales remains in the local area. The crude oil is pumped at the source and refined at facilities throughout the world. The transportation of the gasoline to Flagstaff is often undertaken by individuals living outside the region, and for firms whose owners reside elsewhere. The local gas stations are impacted only by the dollar amount of the increased sales which remain in the local economy. Most of the value spent for a gallon of gasoline is used to fund the activities of entities that produce and transport the gasoline to the local service stations and is not counted as part of the impact on the region.

The Impact of Northern Arizona University on Arizona including Coconino, Maricopa and Yuma Counties as well as the Balance of the State The impacts of Northern Arizona University are analyzed for Arizona overall and separately for Coconino, Maricopa and Yuma Counties as well as for the Balance of the State. The impacts are separated into five distinct components. The first and largest impact results from the day-today activities undertaken at NAU as well as spending by NAU employees. These figures include spending from all sources for construction, operations and wages and salaries at NAU. The numbers used in this study were obtained from appropriate NAU departments and offices throughout the campus network. The second largest impact is generated by expenditures made by students attending NAU campuses throughout Arizona. Over the past several years, NAU enrollments have increased dramatically in various locations throughout Arizona while enrollments in Flagstaff have declined. As a result, the impact of student spending has become more widely dispersed and generates a substantial economic impact in regions outside Coconino County. The third impact is attributed to the spending by visitors to NAU campuses as well as to those persons who visit students who are attending NAU. Spending by visitors is included in the overall impact in order to account for dollars spent at athletic, music, cultural and other events occurring on the campus as well as by friends, family, and others who travel to the campus to visit or conduct business at the university. Some stay overnight, others do not; still others spend several days on campus for retreats, camps, Elderhostel and other events that span several days. Their impacts are measured by the amount of money spent during the time they visited the campus. Spending by NAU retirees was also considered when determining the overall impact of NAU on the state and county economies. Expenditures made by these persons are considered as part of the impact associated with NAU since their presence in the state can be partly attributed to their prior employment at the university. In line with the methodology presented earlier, these individuals may not have a reason to reside in Arizona if NAU had not been here to provide them employment. Their continued residence in Arizona in their post-employment years can; therefore, be counted as part of NAU's contribution to the state and county-level impacts. Finally, NAU presently confers over 3,700 degrees each year to graduates at the bachelor, master and doctoral levels. These students will earn greater salaries over the course of their working lives compared to what they would earn without their degrees. Therefore, the incremental spending that results from the higher incomes earned by NAU alumni also contributes to the NAU impact on the state economy. Since this study is designed to measure the impact attributed to NAU on an annual basis, we have included numbers that capture alumni spending due to their higher incomes on a one-year rather than a lifetime basis. A case could be made for including all of NAU's living alumni that live and work in Arizona. During each year of their working lives, these graduates earn more than they would have had they not completed their degrees. This earnings differential tends to increase during their careers and results in substantial increases in lifetime incomes. A separate review of the impact of all NAU alumni is presented at the end of this study to highlight this contribution.

The impacts of each of these activities are discussed and presented in the following sections of this report. The overall impact in each region was compiled by summing the impacts generated by each of the five spending groups. Comparable analyses are presented here for the State of Arizona as well as for the four separate county models (Coconino, Maricopa, Yuma, Balance of State). We used the following measures to demonstrate NAU's impact in various ways. Information is presented and analyzed at the statewide level and for each of the county areas listed above for the following variables: Total Expenditure or Output Employment Employee Compensation Personal Income Overall NAU Impact on Arizona The overall impact of NAU on the State's economy in 2003 was $911,172,600. This figure represents the total spending (direct, indirect and induced) by all of the sectors mentioned above (NAU and its employees, students, visitors, retirees and incremental alumni expenditures.) The spending impact along with the impacts related to employment, employee compensation and personal income are shown in Table 1. A more detailed breakout of where these impacts occurred is found in Tables A-1 to A-4 in Appendix A. (Note: In input-output analysis, government services are valued at their production costs, because these services are not sold at market prices. As a result total output and total expenditure are the same amounts.) As shown in Table 1, almost $535 million of the $911 in total expenditure is a result of direct spending by these groups. An additional $152 million resulted from indirect expenditures by Arizona businesses whose operations were positively influenced by the increased levels of initial spending in the state. Furthermore, almost $225 million in induced expenditures resulted from increased household spending that was generated by increased household incomes. The difference between the $911 million in overall spending and the $535 million in direct spending is referred to as the multiplier effect. Here, the multiplier is 1.70 which means that every $1 million dollars of expenditure made by NAU generates an additional $700,000 in spending somewhere else in Arizona. The overall effects of these spending activities associated with NAU also generated a significant increase in statewide employment. Full-time equivalent direct employment at NAU averaged 4,443 in fiscal 2003. In addition, another 3,844 full-time equivalent workers were employed as a result of spending by students, visitors, retirees and alumni. Overall, 8,287 jobholders in the state directly owe their positions to spending by NAU and these groups of individuals. This, in turn, stimulated additional employment within the state that added 1,618 jobs in the indirect sector. The increase in household incomes that resulted from more persons being employed in both the direct and indirect sectors created an additional 2,636 jobs in the induced sector. In total, 12,541 persons are employed in Arizona as a result of NAU's presence. This results in a statewide employment multiplier of 1.51, and says that each 100 full-time jobs at NAU generate another 51 positions elsewhere in the state.

NAU's direct impact on employee compensation was almost $244 million. This figure includes all wages and salaries paid to employees at NAU as well as the salaries paid to workers employed in other sectors that were initially impacted by the spending of NAU faculty, staff, students and other spending groups. As these dollars were spent and re-spent in the state, they generated additional compensation to workers employed in the indirect and induced sectors. This activity increased NAU's contribution to the total employee compensation in the state to over $378 million. The multiplier effect related to employee compensation is 1.55. This means that for each $1 paid to employees at NAU, another 55 cents in employee payments also occurred somewhere else in Arizona. The final area of analysis addresses the amount of personal income generated in the state as a result of NAU and its activities. The personal income reflects the salaries and benefits paid to employees at NAU and to workers in other businesses that benefited from spending by NAU's presence. Personal income also includes proprietors' income as well as other property income received by local landlords. In fiscal 2003, the amount of personal income directly associated with NAU's presence was $312 million. The direct personal income was supplemented by additions to income generated in the indirect and induced sectors and eventually resulted in an increase in total personal income of $531 million in the state. These increases generated a personal income multiplier equal to 1.70. This suggests that for each $1 million in personal income generated at NAU, another $700,000 in personal income was created in the state. Table 1

The Statewide Impact of the Operations of NAU for Fiscal Year 2003

Impact Total Output Employment Employee Compensation Personal Income Direct 534,798,900 8,287 243,991,800 312,065,400 Indirect 151,653,500 1,618 59,363,500 91,017,900 Induced 224,720,200 2,636 75,141,000 127,698,800 Total 911,172,600 12,542 378,496,300 530,782,100

Overall NAU Impact on Arizona Counties A similar analysis was prepared for each of the county-wide analyses in this study. The results are shown in Table 2 below and the interpretations are similar to what was presented for the state in the previous section. NAU's contribution to output, employment, employee compensation and personal income are reported separately for Coconino, Maricopa and Yuma counties as well as for the Balance of the State. The impacts vary considerably, with approximately 3/4 of the total impact occurring in Coconino County which is home to the Mountain Campus, and 1/4 of the impacts occurring in the remaining counties of the state.

Table 2

The Countywide Impact of the Operations of NAU On Coconino County for Fiscal Year 2003

Impact Total Output Employment Employee Compensation Personal Income Direct 425,870,700 6,434 203,636,700 246,632,600 Indirect 75,789,100 955 23,144,900 42,009,100 Induced 108,434,200 1,513 34,788,400 61,829,500 Total 610,094,000 8,902 261,570,000 350,471,200

The Countywide Impact of the Operations of NAU On Maricopa County for Fiscal Year 2003

Impact Total Output Employment Employee Compensation Personal Income Direct 44,870,600 893 15,955,300 26,663,300 Indirect 11,488,800 115 4,254,400 6,676,400 Induced 14,717,100 165 4,999,800 8,442,200 Total 71,076,500 1,173 25,209,500 41,781,900

The Countywide Impact of the Operations of NAU On Yuma County for Fiscal Year 2003

Impact Total Output Employment Employee Compensation Personal Income Direct 10,136,900 198 4,021,500 6,310,400 Indirect 1,822,100 24 566,500 988,400 Induced 2,623,400 37 818,600 1,478,600 Total 14,582,400 259 5,406,600 8,777,400

The Countywide Impact of the Operations of NAU On Balance of the State for Fiscal Year 2003

Impact Total Output Employment Employee Compensation Personal Income Direct 49,331,800 1,101 16,085,900 28,875,800 Indirect 10,323,300 125 3,167,000 5,540,300 Induced 14,196,600 193 4,548,300 8,049,300 Total 73,851,700 1,419 23,801,200 42,465,400

Overall Impacts in Coconino County The overall county impacts are highlighted in Table 2. Coconino is the first county reported in the table. As expected, the majority impact of NAU operations is generated in Coconino County. Total direct expenditures by NAU and its related spenders (employees, students, visitors, retirees and incremental alumni spending) was nearly $426 million in 2003. Additional rounds of expenditures boosted this total to $610 million once the impacts of the multiplier were considered. Direct employment in the county was 6,434 and an additional 2,468 persons were hired in support of these workers elsewhere in the county for a total of 8,902 total jobs. Thus, for every 100 NAU employees, another 38 persons are hired elsewhere in the county due to the indirect and induced expenditures. Total employment in Coconino County averaged 61,850 in Fiscal 2003. Based on this study, direct employment associated with NAU accounts for almost 10.4% of total county employment. This figure increases to 14.4% once the multiplier impacts are included. In other words, one of every seven jobs in the county directly or indirectly, exists due to NAU's presence. Employee compensation in the county was directly enhanced by $204 million reflecting NAU payroll as well as payments made to others in direct support of the university. Overall, this compensation exceeded $261.5 million after accounting for the multiplier impacts. Personal income of county residents rose by almost $247 million as a direct result of NAU operations and by $350 million once all the side impacts are included. The $350 million represents approximately 11.8% of total personal income in the county. (This figure is based upon an update of the official 2001 Personal Income figures for the county as estimated in the Bureau of Economic Analysis BEARFACTS report.) Overall Impacts in Maricopa County Northern Arizona University also exerts a considerable economic influence in Maricopa County. The amount of these impacts is also shown in Table 2. Total direct expenditures by NAU and others directly affiliated with the university in Maricopa County were almost $45 million in 2003. Once these dollars had been spent and re-spent in the county, NAU's total contribution to spending rose to $71 million in Maricopa County. NAU-related employment in Maricopa County was 893 and 1,173 jobs exist in the county after accounting for the jobs multiplier. In Maricopa, every 100 NAU jobs, generates another 31 jobs elsewhere in the county. NAU presence in Maricopa County also directly added nearly $16 million in employee compensation in the State's largest county. NAU's employee compensation impact rises to $25.2 million after the multiplier effects are added to the total. Personal income in Maricopa County was higher by $26.7 million as a direct result of NAU operations there. Personal income increased by $41.8 million in Maricopa after adding the indirect and induced impacts to this amount.

Overall Impacts in Yuma County The overall Yuma County impacts also appear in Table 2 above. Total direct expenditures by NAU and its related spenders (employees, students, visitors, retirees and incremental alumni spending) in Yuma County exceeded $10.1 million in 2003. Additional rounds of expenditures boosted this total to $14.6 million once the impact of the multiplier is considered. Direct NAU-related employment in the county was 198 persons and an additional 61 persons were hired in support of these workers elsewhere in the county for a total of 259 total jobs. Thus, for every 100 NAU employees, another 31 persons are hired elsewhere in the county due to the indirect and induced expenditures. NAU employees and its students and others directly employed as a result of NAU operations received slightly more than $4 million in employee compensation in Yuma County during 2003. This figure rises to $5.4 million once the multiplier effects are added to the total. Personal income of Yuma county residents rose by $6.3 million as a direct result of NAU operations and by $8.8 million once all the indirect and induced impacts are included. Overall Impacts in the Balance of the State Finally, we estimate Northern Arizona University's impacts on the remaining areas of the state. Once again, NAU exerts a considerable economic influence in these regions. These impacts are included in Table 2. Direct expenditures by NAU and others affiliated with the university in these counties exceeded $49.3 million in 2003. After spending and re-spending, total spending in the Balance of State increased by $73.9 million due to NAU's presence. NAU-related employment in the Balance of the State was 1,101; however, 1,419 jobs exist in these areas after accounting for the jobs multiplier of 1.29, or 29 jobs for every 100 NAU jobs. NAU directly added $16.1 million in employee compensation in these counties, and $23.8 million after the multiplier effects are added to this total. Personal income added to the Balance of State was $28.9 million as a direct result of NAU operations. Personal income increased by $42.5 million overall. The overall impacts presented here illustrate the magnitude of the impact that NAU generates outside Coconino County in regions throughout the state. Once the multiplier effects have been included, NAU's satellite and distance education operations located in counties outside Coconino County are responsible for 2,851 jobs and $160 million in expenditures which created $93 million of new income in these counties in addition to the economic impacts generated in Coconino County.

Analysis of Impacts by Type of Spender This section of the report reviews the impacts generated by type of spender. The levels of expenditure and employment in the State and in each county are summarized here to reflect the spending generated by each of the five separate groups analyzed in this report. These spending groups are NAU and its employees, its students, visitors to the campuses, NAU retirees living in Arizona, and 2003 NAU alumni residing in Arizona. Tables 3 through 12 provide the information on the overall expenditure and employment impacts associated with the spending levels made by each of these five groups. Impacts are again shown for the state as well as for Coconino, Maricopa and Yuma counties and the Balance of the State. These numbers reflect activity for Fiscal 2003, and as in the previous section, the expenditures made by the alumni are based solely on the incremental income received by NAU alumni as a result of obtaining their degrees from NAU, not on their total income. For purposes of internal consistency, this study is designed to measure the estimated annual spending for only the most recent year's graduates, and does not include spending by all NAU alumni residing in Arizona. Highlights of Impacts by Type of Spender (Summary of Tables 3-12) State of Arizona: The total impact in Arizona generated by the following groups in FY 2003 was: NAU and NAU Employees: $508.9 million and 7,085 jobs Students: $264.5 million and 3,389 jobs Visitors to the campuses: $ 66.7 million and 1,185 jobs Retirees: $ 26.4 million and 342 jobs Alumni 2003: $ 44.6 million and 541 jobs Total Statewide impact: $911.2 million and 12,542 jobs Coconino County: The total impact in Coconino County generated by the following groups in FY 2003 was: NAU and NAU Employees: $390.9 million and 5,211 jobs Students: $145.3 million and 2,262 jobs Visitors to the campuses: $ 55.5 million and 1,154 jobs Retirees: $ 11.9 million and 181 jobs Alumni 2003: $ 6.5 million and 95 jobs Total impact in Coconino County: $610.1 million and 8,902 jobs Maricopa County: The total impact in Maricopa County generated by the following groups in FY 2003 was: NAU and NAU Employees: $ 12.2 million and 479 jobs Students: $ 33.8 million and 402 jobs Visitors to the campuses: $ 0.1 million and 2 jobs Retirees: $ 5.2 million and 64 jobs Alumni 2003: $ 19.7 million and 226 jobs Total impact in Maricopa County: $ 71.1 million and 1,173 jobs

Yuma County: The total impact in Yuma County generated by the following groups in FY 2003 was: NAU and NAU Employees: $ 3.8 million and 81 jobs Students: $ 7.6 million and 116 jobs Visitors to the campuses: $ 1.3 million and 32 jobs Retirees: $ 0.2 million and 3 jobs Alumni 2003: $ 1.8 million and 26 jobs Total impact in Yuma County: $ 14.6 million and 259 jobs Balance of the State: The total impact in the Balance of State generated by the following groups in FY 2003 was: NAU and NAU Employees: $ 8.4 million and 498 jobs Students: $ 43.4 million and 599 jobs Visitors to the campuses: $ 0.8 million and 16 jobs Retirees: $ 6.8 million and 102 jobs Alumni 2003: $ 14.6 million and 204 jobs Total impact in Balance of the State: $ 73.9 million and 1,419 jobs Table 3

Expenditures Made in Arizona Classified by Type of Spender in Fiscal Year 2003

Category NAU and Employees Students Visitors Retirees Alumni Total Expenditures Direct 279,172,200 169,129,500 41,108,500 16,759,900 28,628,800 534,798,900 Indirect 87,483,500 42,407,200 10,440,600 4,224,100 7,097,100 151,653,500 Induced 142,267,500 52,915,900 15,180,000 5,454,800 8,901,900 224,720,200 Total 508,923,200 264,452,600 66,723,100 26,438,800 44,628,800 911,172,600