Imagine dropping a rock into a pond. There’s an initial splash and then there are the ripples that follow. If LSU is the rock, the ripples it produces are worth nearly $4 billion to Louisiana.
A study done by the university’s Division of Economic Development determined that LSU’s nine campuses impact the state by as much as $3.9 billion every year.
To come up with a snapshot of LSU’s value to Louisiana, the study measures everything from the goods and services LSU buys from vendors, the spending habits of faculty and staff and the cost of students’ food, transportation and housing.
The study found that for every dollar LSU receives from the state, the university’s campuses collectively provide a return of $5.08 in total economic activity.
LSU President F. King Alexander on Friday said he asked economists at the E.J. Ourso College of Business this summer to come up with a way to measure LSU’s impact on different regions of the state and on Louisiana as a whole.
“I’m proud to announce these results,” Alexander said. “It is very important that we did this because it helps us quantify our impact.”
Economists looked at how much money LSU spends, how much money people at LSU earn, and the number of jobs the university creates. They found that during the 2012-13 fiscal year, LSU created 36,757 jobs, either directly or indirectly, amounting to $1.5 billion in statewide earnings.
Stephen Barnes is the director of the business school’s Division of Economic Development. He said the goal was to come up with numbers that show what LSU’s immediate benefit to the state is on a yearly basis.
“I think most residents of Louisiana probably have a good idea that LSU is important to the state or makes a contribution to the state’s economy,” he said. But the goal was to come up with a number.
Barnes said economists based their findings on an old business concept known as an economic impact multiplier. The concept examines historical relationships. In other words, economists look at changes in spending in one industry and study how that affects the amount of economic activity happening in another industry, Barnes said.
He compared it to how economists predict how many direct and indirect jobs will be created with the building of a new plant or an expansion of a shipyard.
“You’re looking at what happens when you bring new dollars into an industry. We used standard methodology and applied it to a university,” he said. “The most important thing is that it’s very much tangible. It represents the here and now.”
Economists started with the money LSU is spending and looked at how it ripples into other industries. Next, they looked at how much faculty and staff earn. From there they predicted how much people of certain income levels spend annually versus how much they save. They also looked at the consumption habits of students.
The study found that during the 2012-13 fiscal year, LSU supported Louisiana and different regions of the state in the following ways:
- Statewide: $3.9 billion in sales; $1.5 billion in new statewide earnings; and an estimated 36,757 direct and indirect jobs.
- Baton Rouge: $2.1 billion in sales; $764 million in earnings; and more than 21,400 jobs.
- New Orleans: $887.8 million in sales; $391.2 million in earnings; and approximately 6,900 jobs.
- Shreveport-Bossier City: $535.7 million in sales; $214.8 million in earnings; and 2,400 jobs.
- Alexandria: $52.7 million in sales; $17.6 million in earnings; and about 640 jobs.
- Lafayette: $47.2 million in sales; $17.1 million in earnings; and 515 jobs.
The LSU system includes the main campus in Baton Rouge; the LSU Agricultural Center; the Paul M. Hebert Law Center; Pennington Biomedical Research Center; LSU-Alexandria; LSU-Eunice; LSU-Shreveport; and the LSU Health Sciences Centers in Shreveport and New Orleans.