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Economic Impact of Centers and Institutes in Florida’s Public Universities Tim Lynch, Ph.D., Director Julie Harrington, Ph.D., Asst. Dir. Center for Economic Forecasting and Analysis Florida State University www.cefa.fsu.edu September 24, 2002 Old Economy People Productivity Low cost production Strong economy Capital Entrepreneurs Profits Goods Services New Economy People Capital Higher productivity Higher wages Higher quality of life More resilient economy Higher efficiency Higher wealth Higher profits Entrepreneurs Goods Services Overview of Florida’s Centers and Institutes (C/Is) For fiscal year 2001, there were 512 C/Is located at 10 Universities in Florida (FSU, FAMU, UF, FIU, UCF, FGCU, FAU, UNF, USF and UWF). The C/Is are categorized by type center (1,2 or 3) based on their budgetary support and overall mission. Our project’s objective is to respond to an overall legislative charge to evaluate the return on the state’s investment in centers and institutes in Florida’s public universities. The project, still in development, has conducted a comprehensive survey (52.2% response rate) as a means to quantify intangible benefits of C/Is, has completed statistical and economic analyses,and is conducting on-site interviews of C/Is. The economic analysis of C/Is was performed using REMI. Percentage of C/I Activities Percentage of C&I Activities 2000-01 Public Service/Other 20% Teaching/ Training 30% Basic & Applied Research 50% Areas of Principle Concern Addressed by C&I Activities 1. Maternal/Child Health and Child Development Issues 2. Economy/Business/Transportation 3. Elderly/Aging 4. Environmental/Ecology/Energy 5. Governance/Law/Race 6. Healthcare/Medicine 7. Schools/Education 8. Community/State/National/International Outreach C/I Model Framework (Basic Assumptions) As part of our modeling strategy, we examined two scenarios, the revenue and expenditure approach regarding the impact of C/Is on the Florida economy. The base model assumed a constant rate of growth for the economy. The revenue approach model used: data for fiscal year 2001 for type 1,2,3 Total; SUS state investment = $88.8 million; The state investment leverages an additional $212.71 million in contracts and grants, fees (auxillary) and private funding, yielding a total of $301.5 million. The expenditure approach provided a greater level of detail, where actual fiscal year 2001 C/I expenditures (by category; salaries, expenses, etc.) were entered into the model. We assumed that, in the absence of SUS C/Is, the SUS investment ($88.8 million) will be reallocated to other higher educational activities. REMI results will be expressed in terms of impacts on GRP, employment, personal (disposable) income and state tax revenues. Percent of University Expenditures for SUS C/I’s for Fiscal Year 2001 Salaries 4.6% 12.0% Special Cat. 0.2% 40.5% Electrical Operating Expenses 27.9% Other 6.9% 1.0% 7.0% Graduate (Sal) House Staff (Sal) C/I Models For REMI Workshop Revenue vs. Expenditure Models Four Expenditure Scenarios Using C/I Employment Numbers Using C/I Salary Data Using C/I Employment Numbers and Detailed Sector Data Using C/I Employment Numbers and Final Sales REMI Tax Results vs. CEFA Tax Results REMI Inputs For Revenue and Expenditure Models Policy Variable Categories Detail Selection Output BlockDetailed Government SpendingState & Local Higher Education Output BlockIndustry DemandFinal and Intermediate Demand Computer & Data Processing Misc. Business Services Electric Utilities Misc. Professional Services Computer & Office Equipment Labor and Capital Demand Block Employment Education Medical Misc. Business Services Misc. Professional Services REMI Expenditure Approach Policy Variable and Value Detailed Breakout University C/I's Expenditure Categories Sector Special Category, computer and data processing output component block; Demand Libraries component of special category output block; Demand Libraries component of special category output block; Demand Libraries component of special category output block; Demand Libraries component of special category output block; Demand Libraries component of special category output block; Demand Libraries component of special category output block; Demand Libraries component of special category output block; Demand Electrical component output block; Demand Operating Expenses output block; Demand Expenses category output block; Demand Expenses category output block; Demand Expenses category output block; Demand Expenses category output block; Demand Expenses category output block; Demand Expenses category output block; Demand Other category; subcontracts primarily output block; Demand Other category; subcontracts primarily output block; Demand Other category; subcontracts primarily output block; Demand Salaries category Labor and Capital Demand;Employment Salaries category Labor and Capital Demand;Employment Salaries category Labor and Capital Demand;Employment Salaries category Labor and Capital Demand;Employment Detail computer and data processing misc. business services real estate credit and finance communication other transportation printing electrical equipment electric utilities office & computing equipment computer and data processing repairs to buildings research and testing services local & interurban transit air transportation misc. business services legal services A&E services research and testing services Education Medical Misc. Bus Misc. Prof 2001 Data -12 -0.5 -0.5 -0.2 -0.2 -0.01 -0.2 -0.1 -0.35 -15.152 -20.87 -6.96 -6.96 -3.48 -3.48 -27.83 -10.5 -10.5 -10.5 -1.156 -0.001 -0.166 -0.09 Revenue and Expenditure Approach Results Revenue Approach Real Discount Rate Discount rate and factor 3.0% Discounted GRP $ Discounted Real Disposable Income $ Employment (Thousands) Dollars 256,344,236 183,850,325 5,832 Expenditure Approach Using Broader Sector Categories and Salary Data (Salary Model) Real Discount Rate Discount rate and factor 3.0% Discounted GRP $ Discounted Real Disposable Income $ Employment (Thousands) Dollars 269,416,041 243,924,273 6,955 Revenue and Expenditure Approach Results, Continued Expenditure Approach Using Broader Sector Categories and Employment Numbers (Employment Model) Real Discount Rate Discount rate and factor 3.0% Discounted GRP $ Discounted Real Disposable Income $ Employment (Thousands) Dollars 234,712,143 241,515,218 6,953 Expenditure Approach Using Detailed Sector Categories (Employment and Detailed Model) Real Discount Rate Discount rate and factor 3.0% Discounted GRP $ Discounted Real Disposable Income $ Employment (Thousands) Dollars 275,449,029 278,050,728 7,972 Revenue and Expenditure Approach Results, Continued Expenditure Approach Using Broader Sector Categories and Employment Numbers (Final Sales Model) Real Discount Rate Discount rate and factor 3.0% Discounted GRP $ Discounted Real Disposable Income $ Employment (Thousands) Dollars 273,982,255 245,303,832 6,757 Centers and Institutes Economic and Employment Results for Revenue and Expenditure (Salary Model) Approaches For FY 2001 Gross Regional Product Employment $275,000,000 $270,000,000 $265,000,000 $260,000,000 Gross Regional Product Employment $255,000,000 $250,000,000 $245,000,000 Revenue Approach Expenditure Approach 7,200 7,000 6,800 6,600 6,400 6,200 6,000 5,800 5,600 5,400 5,200 Tax Revenues for Direct and Indirect Economic Activity for C/Is in Florida, 2001 STATE AND LOCAL TAX RECEIPTS DOR ADMINISTERED TAXES/ DOR ACCOUNTS OFFICE OF RESEARCH & ANALYSIS Fiscal Year 2001 Statistics DOR State Tax Receipts REMI # OF EMPLOYEES 2001 9,085,236 TAX COLLECTION LEVEL TAX COLLECTION CATEGORY Sales & Use Tax (chapter 212) Sales at 6 percent Use at 6 percent Corporate Taxes (chapter 220 & 221) Documentary Stamp Tax (chapter 201) Insurance Premium Tax (chapter 624) Intangibles Taxes (chapter 199) Annual Tax (B & D) Beverage ? Nonrecurring Tax (C) Government Leasehold Tax Estate Tax (chapter 198) Severance Taxes (chapter 211) Part 1 - Oil & Gas Part 2 - Solid Minerals Fuel Tax (chapter 206) Part 1 - Motor Fuel Part 2 - Special Fuel Diesel & Misc. Special Fuel Lp Gas (Altern. Fuel Decal) Part 3 - Aviation Fuel Fuel Tax (chapter 336) SCETS Gross Receipts Utility Tax (chapter 203) Pollutants Taxes (chapter 206 pt. IV) Coastal Protection Tax Water Quality Tax Inland Protection Tax Hazardous Waste Dry Cleaning Tax (chapter 376) Rental Car Surcharge (section 212.0606) Waste Tire Fee (chapter 403) Lead Acid Battery Fee (chapter 403) Audit & Warrant Collections Misc. State Taxes and Fees Total DOR State Taxes $ $ $ $ $ $ $ $ $ $ 14,881,006,072 852,726,382 1,591,873,507 1,305,200,810 387,855,367 717,300,000 498,923,872 233,469,995 907,385 707,564,664 $ $ 8,449,519 40,864,529 $ 1,019,975,798 $ $ $ $ $ 186,908,486 6,253 65,112,188 459,684,720 651,141,531 $ $ $ $ $ $ $ $ $ $ $ 7,590,854 20,188,109 206,755,525 20,692,847 9,902,297 145,891,717 18,887,665 9,240,112 214,293,026 2,086,860 24,264,500,090 TAX YIELD PER EMPLOYEE $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1,637.93 93.86 175.22 143.66 42.69 78.95 54.92 25.70 0.10 77.88 0.93 4.50 112.27 20.57 0.00 7.17 50.60 71.67 0.84 2.22 22.76 2.28 1.09 16.06 2.08 1.02 23.59 0.23 2,670.76 TAX YIELD PER / MILLION $ GRP $31.19 $1.79 $3.34 $2.74 $0.81 $1.50 $1.05 $0.49 $0.00 $1.48 $0.00 $0.02 $0.09 $0.00 $2.14 $0.00 $0.39 $0.00 $0.14 $0.96 $1.36 $0.00 $0.02 $0.04 $0.43 $0.04 $0.02 $0.31 $0.04 $0.02 $0.45 $0.00 $50.85 TAXES GENERATED BY SUS CENTERS & INSTITUTES FROM 2001 CONTRACTS & GRANTS $ 8,401,978 $ 481,459 $ 898,789 $ 736,931 $ 218,987 $ 404,995 $ 281,698 $ 131,820 $ 512 $ 399,499 $ $ 4,771 $ 23,073 $ $ 575,889 $ $ 105,531 $ 4 $ 36,763 $ 259,543 $ 367,642 $ $ 4,286 $ 11,398 $ 116,736 $ 11,683 $ 5,591 $ 82,372 $ 10,664 $ 5,217 $ 120,992 $ 1,178 $ 13,700,001 Tax Revenues for Direct and Indirect Economic Activity for C/Is in Florida, 2001, Continued. OFFICE OF RESEARCH & ANALYSIS DOR State Tax Receipts ----------------------------------------------------------------------- 41,795 TAX COLLECTION LEVEL TAX COLLECTION CATEGORY Sales & Use Tax (chapter 212) DOR LOCAL TAX RECEIPTS Sales Taxes/Surtaxes Infrastructure Surtax Charter County Transit Surtax Education Surtax Indigent Care Surtax Tourist Development Tax Dade Documentary Stamp Tax Motor & Special Fuel Taxes County Voted at 1 cent County & City Nonvoted @ 1-6 cents Additional Local Option Miscellaneous Local Taxes and Fees TAX YIELD PER EMPLOYEE TAX YIELD PER / MILLION $ GRP TAXES GENERATED BY SUS CENTERS & INSTITUTES FROM 2001 CONTRACTS & GRANTS Fiscal Year $ $ $ $ $ $ $ $ $ $ $ 607,749,637 51,563,928 51,922,843 167,125,658 3,711,306 12,099,362 1,738,400,000 62,689,700 533,159,834 141,652,109 - $ $ $ $ $ $ $ $ $ $ $ 66.89 5.68 5.72 18.40 0.41 1.33 191.34 6.90 58.68 15.59 - $1.27 $0.11 $0.11 $0.35 $0.01 $0.03 $3.64 $0.13 $1.12 $0.30 $0.00 $ $ $ $ $ $ $ $ $ $ $ 343,142 29,114 29,316 94,361 2,095 6,831 981,520 35,395 301,028 79,978 - Total DOR Local Taxes $ 3,370,074,377 $ 370.94 $7.06 $ 1,902,781 Total DOR State and Local Taxes OTHER (Florida Tax Handbook 2002) Beverage Licence and Taxes Cigarette and Tobacco Product Tax Motor Veh & Mobile Home Ann Reg All others ***************** ESTIMATE $ 27,634,574,467 $ 3,041.70 $57.91 $ $ $ $ $ 575,300,000 442,800,000 535,900,000 2,980,000,000 4,534,000,000 $ $ $ $ $ 63.32 48.74 58.99 328.00 499.05 $1.21 $0.93 $1.12 $6.25 $9.50 $ $ $ $ $ $ 324,821 250,010 302,575 1,682,540 2,559,946 SUB TOTAL 5,119,892 TOTALS ALL CATEGORIES $ 32,168,574,467 NUMBER OF THOUSANDS 2002$ IMPACT REMI GRP 2001$ $ 269,416 477,171,160,920 $ 3,540.75 $67.42 $ 18,162,728 Comparison of Tax Results Using Expenditure Salary Model REMI Results •For 2001, tax revenues total $32 million •For Years 2001-2035, tax revenues total $320 million (2001 dollars) CEFA Results •For 2001, tax revenues total $18 million (excluding property taxes, among others) Results of Economic Analysis for University Centers and Institutes For The State of Florida For the State of Florida, using the revenue approach, if all centers and institutes were removed from the university system, and the state investment ($88.8 million) was reallocated to higher education spending, there would be a net loss of $256 million in GRP, $184 million in personal income, and 5,832 jobs. For the State of Florida, using the expenditure approach (salary model), if all centers and institutes were removed from the university system, and the state investment ($88.8 million) was reallocated to higher education, there would be a net loss of $269 million in GRP, $244 million in personal income, and 6,955 jobs. The difference between the two models (comparing expenditure to revenue model) is $13 million GRP, $60 in personal income and 1,123 jobs.