Report on UC's Economic Impact on State

At the recent Regents meeting, there was a report on the economic impact of UC on the California economy. Yours truly has some reservations about the regional multiplier approach which is emphasized in the report. The short-term real multiplier to be emphasized, which I thought was not adequately highlighted in the report, is that the state puts about $2.5 billion into UC and gets an enterprise with a budget of around $20 billion. A lot of that budget comes from outside the state, i.e., federal research and other funds. And in the long term, the impact on California's growth can be emphasized.

There are lots of ways of calculating regional multipliers of jobs and spending. But, especially at the sub-national level, there are some cautionary notes that are usually omitted or under-emphasized in such exercises. Typically, regardless of methodology, the multiplier at the sub-national level comes out to something like 2 or 3, i.e., for every job created in sector X directly, there is a total of 2 to 3 jobs created because of indirect multiplier effects. Now let X = UC.

As I have pointed out in a class I teach, if you added all sectors of the California economy together and compute and add up each one's direct+indirect effects, there must be 2 to 3 times as many people who work in California as work in California. If that sentence leaves you puzzled, you can begin to see the problem of pushing the multiplier approach.

So it isn't the report that yours truly would have written. Nonetheless, I am duty-bound to give you a link to the report which you can find at:

http://www.universityofcalifornia.edu/regents/regmeet/sept11/f7attach.pdf