The Magnitude of the CSU's Economic Impact

The CSU provides a significant source of benefit to the California economy by generating revenues and creating jobs throughout local economies. The impacts associated with the CSU originate with the institution itself—its faculty, staff, students, and alumni— then percolate through the economy generating successive rounds of economic activity because of the interlinkages between different economic sectors.

Direct spending by the CSU, faculty, staff and students is the most obvious economic impact of the system. Not only does each CSU campus and the Chancellor’s Office purchase goods and services from the surrounding economy, they are also important regional employers.

This direct spending represents only a portion of university-generated spending. The full economic impact of the CSU on the state’s economy, including its impact on other seemingly unrelated sectors beyond those in which it directly participates (education, retail, construction), can be assessed through regional economic impact analysis. Regional economic modeling is founded on the principle that industry sectors are interdependent: one industry purchases inputs from other industries and households (e.g., labor) and then sells outputs to other industries, households, and government. Therefore, economic activity in one sector causes an increased flow of money throughout the economy. For the purpose of this analysis, the modeling software IMPLAN was used to calculate these impacts.

In this assessment of the California State University’s economic impact, two types of economic impacts are presented: the impacts generated by CSU-related expenditures and the impact of earnings of CSU alumni that are attributable to their degree. The impact associated with CSU alumni earnings constitutes the total economic impact of CSU alumni who are currently California-based and thus contributing to and spending their income in the California economy. The value of their CSU degree is evaluated in the differential between their current salary and what they would have earned without their CSU degree.

The CSU-related expenditures for wages and salaries: capital equipment and supplies; student spending on textbooks; meals and housing; and an array of other items related to its educational mission for the 2008-09 academic year totaled $7.96 billion.

The full economic impact of this $7.96 billion of direct CSU-related expenditures is estimated at nearly $17 billion. Simply stated, each dollar of direct spending by the CSU “grows” to $2.13 when indirect and induced spending is considered. This level of spending activity supports almost 150,000 California jobs annually and generates over $995 million in annual taxes for the state and local governments. Assessing the impact of CSU-related expenditures alone confirms that the university is a large and significant institution in California with a spending profile and an economic impact to match.

The economic impact of direct CSU-related expenditures, however, does not capture the full impact of what the university actually does: provide an affordable, accessible quality university education to hundreds of thousands of Californians who would not otherwise be able to attend a university. One of the ways that the full economic impact of the CSU enterprise can be estimated is by focusing on the higher earning power of its graduates. In 2008-09, it was estimated that 1.96 million CSU bachelor’s and master’s alumni living and working in California earned an estimated $122 billion in income. Of this $122 billion in total wages, it is estimated that $42 billion is attributable to their higher level of educational attainment; i.e., their CSU degrees.

The combined direct CSU-related expenditures and the alumni earnings attributable to their degrees have a full economic impact of $70.4 billion when modeled in IMPLAN. This level of economic activity supports roughly 485,000 jobs annually in the state and generates $4.9 billion in annual tax revenue for state and local governments.