James Madison University Office of Institutional Research

THE ECONOMIC IMPACT OF JAMES MADISON UNIVERSITY ON  THE HARRISONBURG/ROCKINGHAM COUNTY AREA AND THE COMMONWEALTH OF VIRGINIA

INTRODUCTION

James Madison University significantly impacts the lives of individuals within the Harrisonburg City and Rockingham County area. As a major comprehensive higher education institution with more than 12,000 students, JMU enriches the local community through its educational, cultural, research, and public service activities. The presence of JMU has provided a stable source of jobs and income for a variety of individuals and businesses for more than 80 years.

The purpose of this study is to describe the economic benefits provided to the local community and the Commonwealth by JMU in the form of estimated dollars spent in the community and full-time equivalent employment related to the University for FY95. It is recognized that JMU also places demands on the local community in the form of its need for public services, its exemption from local taxes, and the large number of employees, students, and visitors who are annually attracted to the area. It is not the purpose of this study to address these issues, but it should be noted that they exist and that the University has an appreciation of how it impacts the community in ways that at times present challenges as well as opportunities.

The last significant study of JMU=s economic impact was published by the Office of Institutional Research in November 1992. The following study employs essentially the same methodology and, in some areas, assumes no change in expenditure patterns.

The remainder of this report describes the methodology employed, the results of the study, and a summary of the University's economic impact.

METHODOLOGY

In some ways, an economic impact study is a subjective exercise. The impacts derived from such studies are dependent upon the methodology employed. There are a wide variety of economic impact methodologies, some of which are very complex, and others which are more streamlined. JMU has used both complex and streamlined economic impact methodologies.

ECONOMIC IMPACT STUDIES AT JMU

Several economic impact studies have been conducted at JMU during the last 15 years. In 1975 a paper was written about the impact of the then Madison College on the educational, cultural, and economic impact on the Harrisonburg/Rockingham County area. At that time it was estimated that the College had a payroll of $11.8 million and approximately $9 million was spent for materials and supplies. It was estimated that the majority of these expenditures went into the local economy. It was estimated that students spent between $4 and $5 million annually in the area. Finally, the College had spent more than $11 million in new construction and planned to spend an additional $25 million for new buildings and residence halls.

In 1978, a more detailed study of the social, political, and economic impact of JMU was published. Students, faculty, staff, alumni, fraternities, sororities, and local business firms were surveyed about their business expenditures. It was estimated that 1,085 full-time equivalent jobs were generated in the community by the presence of the University.

In 1981, the 1978 model was updated, and it was estimated that JMU had a "$54 million impact on the community, including $30.6 million spent annually by the University, its faculty, staff, students and visitors and another $23.6 million generated in local sales by money spent and respent." It was estimated that "JMU provided 1,116 full-time jobs itself in 1979-80 . . . and the presence of the University community was indirectly responsible for another 2,702 local jobs."

The impact of the University during 1991-92 was studied using the methodology described below for this report. That study indicated that total expenditures related to the University within the local area were between $97.7 million and $125.8 million (includes indirect effects), exclusive of capital outlay expenditures, which were substantial. It was estimated that between 1,881 and 2,382 full-time equivalent jobs were generated in the local area by the presence of JMU. Another 1,098 full-time equivalent jobs were generated on the campus. The VEC estimated that approximately 11 percent of all local jobs were related to the University.

1994-95 ECONOMIC IMPACT STUDY:

The economic impact model employed for this study is a hybrid of two economic models. The first model was developed and tested by several colleges in New York, and had a very sensible method for collecting data on the expenditures of students, employees, and the University. The second model, used by the Virginia Employment Commission (VEC), employed a procedure that could estimate JMU's economic impact using the data we had already collected for the first model.

THE NEW YORK MODEL:

The Office of Institutional Research purchased the documentation and a computer template for a model that was developed by several colleges in New York. Since this model had proved useful to these colleges, and appeared to employ an uncomplicated, yet reasonable, methodology, we decided to use it to collect data for the analyses. The documentation for this model described how economic impact data could be gathered. These data were then used as the input to the VEC economic impact model which estimated the total direct economic impact and the number of jobs attributable to JMU.

THE VIRGINIA EMPLOYMENT COMMISSION MODEL:

To help with this study, the Economic Services Division of the Virginia Employment Commission offered to use their software, known as IMPLAN (Impact Analysis for Planning), to analyze the expenditure data gathered by JMU, and to determine an estimate of JMU's impact on the local area and the Commonwealth of Virginia.

According to information supplied by the Virginia Employment Commission,

"IMPLAN is an input-output modeling system with associated data bases. Input-output analysis can be used to estimate the effects of a change in output for one or more industries on an economy. More precisely, this model computes the direct, indirect, and induced effects associated with changes in final demand on an industry-by-industry basis. . . . IMPLAN's data base contains a detailed national inter-industry table and estimates of final demand, final payments, gross output and employment for each county in the U.S."

We used the IMPLAN model because it employs the most current estimate of county and state multipliers. The VEC model is also capable of analyzing impact data of many different expenditure groups such as students, employees, and the University.

CAPITAL OUTLAY EXPENDITURES:

Please note that this study does not include capital outlay spending by JMU. Projects underway during 1994-95, included $15.3 million for the first building of the College of Integrated Science and Technology, $18.1 million for the new University Recreation Center and $9 million for the Campus Electrical Upgrade. These and numerous smaller projects have a significant amount of economic impact on the local area and the state.

DINING SERVICES, RETAIL SERVICES, AND RESIDENTIAL FACILITIES EXPENDITURES:

The University provides many services to its students similar to those provided in the local community. If the University did not have dining facilities, a bookstore, a convenience store, and residence halls, students would have to purchase food, buy books and supplies, and rent/purchase housing within the community. This is exactly what happens at many large state universities such as the University of Virginia, at many urban institutions such as Virginia Commonwealth University, and at virtually all public comprehensive community colleges in the country. We decided to exclude the University's personnel and non-personnel expenditures in these areas from the study. Instead, we assumed that each student lived locally and used the University as a vendor for these services. Employment of staff and students in these services at JMU, with the possible exception of the bookstore, which is the only vendor for textbooks in the community, is primarily related to the number of students who decide to live on-campus and/or decide to eat in campus dining facilities. All University employees (approximately 884 FTE) and their salaries or wages (approximately $7.1 million) related to these areas were excluded from the analyses. However, the number of full-time equivalent employees related to the University that was generated by the IMPLAN model includes these employees. For this study, we derived the annual University-related expenditures per full-time student from data provided by the Financial Aid and Student Employment office.

ECONOMIC IMPACT OF JAMES MADISON UNIVERSITY

The determination of the economic impact of JMU involves both the collection of relevant expenditure data and the analysis of the impact of that data on the local and state economies. The following sections describe the different types of expenditures and the results of the IMPLAN analyses of these expenditures.

DIRECT EXPENDITURES RELATED TO INSTRUCTION:

The University spent $19.2 million, excluding salaries, wages, taxes, and student activities expenditures, in FY95 to support its educational mission. Included in this figure are expenditures for the following: (a) instruction; (b) research; (c) public service to the community; (d) support of the academic programs such as Carrier Library, academic computing, and academic administration; (e) student services such as admissions, registrar, career counseling, and counseling; (f) institutional support activities such as executive administrative services, development, planning, and the new Integrated Information System; (g) operation and maintenance of the University's buildings and grounds; and (h) scholarships and fellowships.

DIRECT EXPENDITURES RELATED TO STUDENT ACTIVITIES:

The University spent $8.7 million in student activity expenditures in FY95. This includes expenditures for the following: (a) estimated food service expenditures not related to student contract dining; (b) bookstore and shops not related to students; (c) estimated residential facilities expenditures not included in room fees paid by residents; (d) parking; (e) telecommunications; (f) student health services; (g) student activities - campus center, intramural, etc.; (h) intercollegiate athletics; and (i) other miscellaneous expenditures. Personal services (salaries and wages) expenditures were excluded, as they were included in total disposable income available to employees.

DISTRIBUTION OF EXPENDITURES:

The University's expenditures during 1994-95 were made in a variety of localities. This study used the average of the FY91 and FY92 percent distributions of spending. These figures were 40 percent expended within the Harrisonburg/Rockingham County area, as defined by the zip codes of the vendors, 20 percent expended outside of the local area, but within the Commonwealth of Virginia, and the remainder, 40 percent, was spent outside of the Commonwealth.

NUMBER OF UNIVERSITY EMPLOYEES AND THEIR DISPOSABLE INCOME:

The University is one of the area's largest employers. As of October 1995, JMU employed approximately 1,336 full-time and 345 part-time individuals in areas other than dining facilities, a bookstore, a convenience store, and residence halls. It is estimated that this total of 1,681 employees equates to 1,452 full-time equivalent employees. Based on home residence, approximately 1,269 of the 1,452 FTE employees live in the Harrisonburg/Rockingham County area. The remainder (183 FTE) live outside the area, but within the state.

During 1995, total disposable income for all University employees described above equaled $45,378,122. This is total money paid directly to all University employees, including payments/deductions for employee benefits, but excluding all taxes withheld and all mandatory retirement deductions.

STUDENTS:

Student data for this analysis was based on a Fall 1994, on-campus student enrollment of 11,539; 10,285 were full-time and 1,254 were part-time students. It was estimated that each full-time student spent $6,162 that year on non-tuition-related items. Part-time undergraduates spent $2,451 each and part-time graduate students spent $2,021 each on these items. This is the amount the Financial Aid and Student Employment office estimated that each student should be prepared to spend for room, board, transportation, books, and miscellaneous expenses.

IMPACT ON HARRISONBURG/ROCKINGHAM COUNTY AND THE COMMONWEALTH:

Tables 1 and 2 give the estimates of total economic impact of JMU according to its expenditure and employment effects. Table 1 is the impact of the University without its induced or household effects. Induced effects are the additional expenditures generated within the community by each household as it uses the money it has. According to the VEC, induced effects are very difficult to estimate accurately, and it is suggested that the data in Table 1, while lower, provide a more conservative estimate of JMU's economic impact. The direct and employment effects are explained below.

The direct effects are the impacts of students, JMU's employees, and University expenditures on the state and local area employment, personal income, and output. Total effects include the direct effects plus the ripple effects (indirect effects) generated by the group's expenditures. It is estimated that a portion of each dollar spent will be respent within the area until the last portion of that dollar is spent. The ratio of the total economic effect on a regional economy to the initial expenditure (direct effect) is called a regional multiplier. For example, the multiplier for students in the local economy is 1.18 ($78.0 million/$66.228 million = 1.18), which means that for every dollar of spending, an additional 18 cents of sales or output is generated by the economy. This multiplier is fairly small, which is due to the structure of the local economy. The local area has a small industrial base and a large number of retail trade and service establishments. Generally, the manufacturing industry has a higher multiplier compared to the retail trade and service industries due to the greater number of components to production of a final product. Also, since the land size of the local area is fairly small, the majority of the local firms may purchase their supplies outside of the area. Therefore, this means that the majority of money spent by students, JMU employees, and the University leave the local area very quickly. It should be noted that the multiplier for the state will be higher due to less money going outside the state's borders.

The employment multiplier shows the number of jobs generated by each $1 million spent by students in the area. In the case of the local area, 16.41 jobs are generated for each $1 million expended by students. The multipliers are a weighted average of industries' employment multipliers based on the level of student expenditures.

The data in Table 1 indicate that the total JMU-related expenditures in the Harrisonburg/Rockingham County area exceed $115 million annually. JMU generates approximately 1,695 full-time equivalent jobs in the community, including approximately 884 full-time equivalent jobs related to dining services, retail sales, and residential facilities on the JMU campus. When the 1,269 full-time equivalent employees who live in the local area and work at JMU is added, it appears that 2,964 full-time equivalent jobs (1,269 JMU jobs + 1,695 local jobs = 2,964 total jobs) in the local area are attributable to JMU.

Total expenditures related to JMU within the state, including the local area, is more than $139 million. JMU generates approximately 419 additional full-time equivalent jobs related to student, employee and direct University expenditures outside of the area. When the 183 full-time equivalent employees of JMU who live outside the area is added to the 419 jobs generated outside the area, but within the state, it is estimated that JMU generates 602 full-time equivalent jobs (183 + 419 = 602). Approximately 3,566 full-time equivalent jobs (2,114 + 1,452 = 3,566) within the state are attributable either directly or indirectly to JMU.

FIGURE 1
ECONOMIC IMPACT OF JAMES MADISON UNIVERSITY
ON THE HARRISONBURG/ROCKINGHAM COUNTY AREA
IN TOTAL EXPENDITURES AND FULL-TIME EMPLOYMENT

The data in Table 2 indicate that the total JMU-related expenditures in the Harrisonburg/Rockingham County area, including induced effects, exceed $154 million annually. JMU generates approximately 2,308 full-time equivalent jobs in the community, including those who work at JMU in dining services, retail sales, and residential facilities. When the 1,269 full-time equivalent employees who work at JMU is added, it seems that 3,577 full-time equivalent jobs (2,308 + 1,269 = 3,577) in the local area are attributable to JMU each year.

JMU's total expenditures within the state, including the local area, is more than $231 million. JMU generates approximately 884 additional full-time equivalent jobs related to student, employee, and direct University expenditures outside of the area. When the 183 full-time equivalent employees of JMU who live outside the area is added to the jobs generated outside the area, but within the state, it is estimated that JMU generates 1,067 full-time equivalent jobs. Including induced effects, approximately 4,981 full-time equivalent jobs (3,529 + 1,452 = 4,981) within the state are attributable either directly or indirectly to JMU.

Figure 1 shows the total impact of JMU on the local economy in terms of total expenditures and full-time equivalent jobs generated. James Madison University's impact in total expenditures is $115.6 million, with $14.4 million (13 percent) in direct expenditures by the University, $23.3 million (20 percent) in retail and rental expenditures by employees, and $78.0 million (67 percent) in student expenditures. Approximately 2,964 full-time equivalent jobs in the local economy are related to the University. Approximately 280 (9 percent) are related to University expenditures, 328 (11 percent) are related to employee expenditures, 1,269 (43 percent) are employed by the University, and 1,087 (37 percent) are related to student expenditures.

SOURCE: Direct expenditure and employment data provided by James Madison University.

Analysis of economic impact prepared by Economic Information Services Division, Virginia Employment Commission based on IMPLAN (Impact Analysis for Planning).

Multiplier¹: This is the number of times each dollar is expended within the community before it is expended outside the community. This is based on $1 of output or expenditures.

Employment²: This section is related to the number of jobs related to expenditures by the University, it employees, and students.

Multiplier³: This is the number of jobs generated per $1 million of output or expenditures. This figure is a composite of the number of jobs produced in many different industries from funds brought into the community by JMU.

SOURCE: Direct expenditure and employment data provided by James Madison University.

Analysis of economic impact prepared by Economic Information Services Division, Virginia Employment Commission based on IMPLAN (Impact Analysis for Planning).

Induced¹: The induced or household effects are included in the impact estimates.

Multiplier²: This is the number of times each dollar is expended within the community before it is expended outside the community. This is based on $1 of output or expenditures.

Employment³: This section is related to the number of jobs related to expenditures by the University, it employees, and students.

Multiplier⁴: This is the number of jobs generated per $1 million of output or expenditures. This figure is a composite of the number of jobs produced in many different industries from funds brought into the community by JMU.

The data indicate that JMU has a significant impact on the local and state economies. Table 3 is a summary of the different impacts in terms of total expenditures and jobs created, and includes impact with and without induced effects. Given that the staff at the VEC cautioned against relying too heavily on the induced effects because they are more difficult to measure, it would seem that the most prudent approach would be to estimate that the actual expenditure and employment impacts are closer to the lower of the ranges given. The total expenditures in the local economy that are attributable to JMU were between $115 million and $154 million in 1994-95. Between 1,695 and 2,308 full-time equivalent jobs were created in the community as a result of these expenditures. When the full-time equivalent employment of the University is included, the total jobs attributable to JMU was between 2,964 and 3,577.

The University also has a significant impact on the state's economy. Total expenditures within the state, including Harrisonburg/Rockingham County, was between $139 million and $231 million. Between 2,114 and 3,529 jobs were created as a result of the expenditures related to JMU. Finally, when full-time equivalent employment of the University is included, the total jobs attributable to JMU in the state is between 3,566 and 4,981.

* Includes full-time equivalent positions at JMU in dining services, retail sales, and residential facilities.

SUMMARY

An economic impact study is a somewhat subjective exercise. The economic impact of an institution as large and complex as James Madison University is quite substantial in an area the size of Harrisonburg and Rockingham County. The purpose of this economic impact study has been to generate an estimate of the impact of JMU in the local area and the state in terms of total dollars spent and the number of full-time equivalent jobs created. While the objectives of this analysis were limited, the results certainly show that JMU is a major economic contributor to the local economy.

The estimates generated in this study are conservative, both in methodology and the scope of expenses used. Expenses not used include capital outlay, student expenses for luxury items and activities (not included in the Financial Aid base budget), summer student and student parent expenditures, regular term parent expenditures, expenses resulting from summer auxiliary activities, and expenses of visitors to the University for athletic, alumni, and special academic events. The net of these expenses is a significant contribution to the local area, especially the construction and hospitality/tourism industries.

The impact of the University on the local economy is shown in many ways, including how its funds are expended. During 1994-95, JMU expended $6.8 million, exclusive of salaries, wages and fringe benefits, on instruction and academic support. In calendar year 1995, University employees received net paychecks totaling almost $51 million. Students spent an estimate of more than $66.2 million on housing, food, transportation, and miscellaneous items in addition to their tuition and fees. The study indicates that total expenditures related to the University within the local area are between $115.6 million and $154.6 million (includes induced effects), exclusive of capital outlay expenditures, which were also substantial.

The creation of local jobs by spending is another measure of the University=s impact. The data for this study included an adjusted base of 1,269 full-time equivalent University jobs in the local area. An additional figure of between 1,695 to 2,308 full-time equivalent jobs generated locally by the presence of JMU were estimated by this study. The unadjusted number of all full-time and part-time JMU employees, 4,495, represented nine percent of all jobs in the local area in the Fall of 1995.

The University also has a significant impact on the state's economy. JMU generates an estimated 602 to 1,067 full-time equivalent jobs outside of the area but within the state. Overall, it is estimated that JMU generates between 3,577 and 4,981 full-time equivalent jobs either directly or indirectly in the community and in the state.

The obvious conclusion from this economic impact study is that JMU is a major contributor to the economic health of the Harrisonburg/Rockingham County community. The economic impact of the University is expected to continue to increase. The University=s new College of Integrated Science and Technology (CISAT) enrolled 1,611 majors in Fall 1995, including 306 in its new ISAT program. CISAT will eventually enroll more than 3,000 students with the greatest percentage of that growth in new and innovative programs. The Fall of 1996 will bring about 1,500 more on-campus students than were included in this study which used Fall 1994 enrollment data. This increase in enrollment will add an estimated 140 jobs to the local economy from student spending alone (not including new positions for faculty or jobs generated from additional University or employee spending). The Office of Institutional Research will continue to periodically review the economic impact of the University on the local community and the state.

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