UC SANTA CRUZ: An Economic Resource for the Entire Community

THE UNIVERSITY OF CALIFORNIA SANTA CRUZ has just marked its 37th year in the Santa Cruz Community, bringing with it the history and renown of an internationally recognized educational facility.  In addition to being nationally awarded for its commitment to undergraduate teaching, the high quality of its research programs, and the level of service it performs for the people of California, UC Santa Cruz has become a major participant in the cultural and economic well being of the local region.  UC Santa Cruz now attracts as much as $479 million into the region each year in operating and capital funding.  When combined with a conservative multiplier to estimate the effect of the spending and re-spending of those dollars, the financial impact of UC Santa Cruz on the local economy was estimated to be $1 billion in 2002-03.

The Multiplier Effect

In 2002-03, UC Santa Cruz attracted an estimated $480 million from outside the local area and channeled it into the local economy.  Using a conservative multiplier to estimate the effect of the spending and re-spending of these dollars, the impact of UC Santa Cruz on the local economy was estimated to be $1 billion in 2002-03.

Sector Expenditures in local economy (in millions) Economic impact in local economy (in millions)
Faculty and Staff $195 $410
Students $171 $359
Summer Session, Conferences and Campus Visitors $29 $62
University Purchases, Utilities and Construction Projects $47 $99
Employee Benefits $37 $78
Total Impact $479 $1,008

Economic Multiplier

When the University and its students and employees spend dollars in the community, local businesses and individuals receiving these dollars in turn spend a portion of them in the local area.  The recipients of that second round of spending also expend a certain amount locally, and the process continues through successive cycles in an ever-diminishing spiral.  Because this spending and re-spending is induced by, and would not occur without, initial expenditures by members of the UC Santa Cruz community, the total monetary flow of all such spending cycles can reasonably be attributed to the University.
Tracing each University-related dollar through the re-spending process in order to determine the exact total of local business volume attributable to the University would be physically impossible.  However a standard assumption of economic theory is that those receiving University related dollars would probably use them as they would use money from other sources.
Economists have developed the concept of the “economic multiplier” to help calculate the total economic activity which results from these successive cycles of re-spending.  In a 1976 study commissioned by the Santa Cruz County Board of Supervisors, the governmental sector model was identified as most applicable to the University, with separate multipliers developed for different categories of expenditure.  Using the same methodology as that of the study (which is the same methodology used in prior UC Santa Cruz Economic Impact Reports) the total impact of UC Santa Cruz expenditures can be estimated.  The calculation estimates that in 2002-03, local expenditures of $480 million generated a total economic impact within the local community of $1 billion.

Faculty and Staff

During 2002-03, UC Santa Cruz as the largest single employer of Santa Cruz County paid salaries to 6,477 full and part-time faculty, staff and students.  More than 10,541 W-2 Forms were issued in the 2002 calendar year.  Faculty and staff employees and members of their immediate families earned an estimated $216 million after taxes in 2002-03.  Approximately 90 percent of this disposable income, $195 million ($410 million economic Impact) is spent on purchases and services within the local community.

Student Expenditures

Last year, UC Santa Cruz’s 13,614 students spent an estimated $190 million after tuition expenses.  Approximately 90 percent of this disposable income, $171 million ($359 million economic impact), is spent in the Santa Cruz area.

Visitor Expenditures in the local area

Visitors to the campus as guests of faculty, staff, students, along with prospective students and their parents, 3,105 summer session students, and approximately 12,000 summer conference attendees spent an estimated $29 million ($62 million economic impact) in patronizing hotels, restaurants, and stores, stimulating the local economy and contributing to local and state tax revenues.

Expenditures for Supplies and Services and Utilities

Last year, the University spent $175 million for supplies and services including utilities. The majority of these items were either not manufactured or sold in Santa Cruz, or were purchased through statewide University contracts.  About $41 million ($86 million economic impact), however, was estimated to be spent within Santa Cruz County.

Construction Projects

A total of 181 construction contracts were awarded in 2002-03 for a total value of $95 million.  Approximately 129 of these construction contracts were awarded to local area contractors for a value of over $6.2 million ($13 million economic impact).  It should be noted that local subcontractors are not included in the above economic impact figures.  If included this economic impact amount would increase.

Employee Benefits

Benefits provided by the University to its faculty and staff include health, life, dental, vision, unemployment insurance, workers’ compensation, and retirement income.  Many of these expenditures, which amounted to $37 million ($78 million economic impact) in fiscal year 2002-03, also influence the local economy.

Community Service

In addition, UCSC faculty, staff and students contribute approximately one million hours of community service annually in the local community.  This represents an economic value of more than $12 million to the local economy.

Tax Revenues

UC Santa Cruz generated new Tax Revenues of $30.7 Million. UC Santa Cruz also generates state and federal government tax revenues.  Last year the campus and its employees withheld the following in taxes:

  • $24.2 million in federal employee income taxes
  • $ 6.5 million in California state income taxes

Economic Impact Report for 2002-03, a report on the ways UC Santa Cruz benefits the local economies, was prepared by the University of California, Santa Cruz Office of Planning and Budget.