2021 Economic Impact Study

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Memorandum To:

Wayne Swann, Director of Office of Technology Transfer, Morgan State University

From: Econsult Solutions, Inc. Date:

January 21, 2021

RE:

Morgan State University – FY 2021 Economic Impact Update

1

Introduction

Morgan State University is a premier public teaching and research institution located in Baltimore, Maryland. It is well regarded for its academic rigor, cutting edge research and public service efforts. As a Historically Black College and University (HBCU), Morgan has a well-documented history of providing opportunities for African-American students to excel, particularly in the engineering and science fields. It also seeks to serve a diverse student body from all backgrounds, while producing high quality graduates that are successfully prepared to serve in a global society. In May 2018, Econsult Solutions, Inc. (ESI) completed an economic impact study for Morgan State University, which largely covered data from FY 2018. Morgan seeks updated economic impact figures, using more recent financial data (inclusive of FY 2021). Economic impacts were estimated for three distinct geographies: Baltimore, the Baltimore Metropolitan Area (MSA)1, and Maryland. Tax revenue impacts were estimated for both the City of Baltimore and State of Maryland governments. Note that temporary COVID-related economic impacts observed in the first half of 2020 are unknown and not included in this analysis. Overall, Morgan is a significant driver of economic impact for Baltimore, the region, and the state of Maryland (see Figure 1): • • • • •

1

Morgan produces a $1.1 billion economic impact and directly or indirectly supports 6,900 jobs statewide each year. Morgan generates over $53 million in state tax revenues every year. Morgan has undertaken $261 million in capital investments over the past 6 years. Morgan students inject an additional $93 million a year in spending into the state. Alumni living and working in Maryland earn about an additional $535 million a year due to the education and credential they received from Morgan.

The Baltimore MSA includes Anne Arundel, Baltimore, Carroll, Queen Anne’s, Harford, and Howard counties.


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Date: January 21, 2021

The following memorandum provides updated estimates of impacts from Morgan’s operations, capital investments, ancillary spending, and the wage premium earned by its alumni. Temporary COVID related impacts, for the 4 months from March-June of 2020, are unknown and not included in the analysis. Figure 1 – Morgan State University Economic Impact Summary, FY 2021

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Date: January 21, 2021

One of Morgan’s distinguishing features is the scale and uniqueness of its research efforts. Its research and innovation work produces scientific discoveries, yields startup ventures and tackles issues of strategic importance to the state. Dollar for dollar, Morgan is significantly more productive than the state’s other research universities and produces at a level higher than the national average. Per $10 million in research expenditures, Morgan produces invention disclosures, new patent applications and other key innovation outputs at a rate significantly higher than the state and national averages, which is a sign of its ability to initiate new scientific breakthroughs (see Figure 2). Figure 2 – Innovation Metrics, per $10 million in Research Expenditures

Source: Morgan State University (2021), Econsult Solutions (2021)

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Date: January 21, 2021

2

Impact from Annual Operations

Morgan’s most direct and consistent contribution to the economy is through its large annual operations. The impacts from its ongoing operations originate from Morgan’s spending on salaries and wages, goods, and services, and activities that help the institution fulfill its mission of education, research, community engagement and public service.

Estimated Economic Impact from Annual Operations Morgan’s current budget is $290 million, up 11 percent from FY 2018. Approximately $135 million of that total goes toward compensation and benefits for the employees of the University. The remaining $156 million is spent on other operating expenses including, but not limited to, general maintenance, utilities, equipment, and contractual services. Over $42 million goes toward student aid, grants, and contributions. While this investment is crucial from the standpoint of the student, it does not manifest as a direct payment but rather a reduction in tuition collected by Morgan. It therefore does not represent new spending within the geographies of interest and is therefore excluded from this analysis. In addition, about $5 million of Morgan’s operations occur outside the City of Baltimore. Therefore, the modeled operating expenditures total approximately $243 million for FY 2021. These annual operating expenditures generate significant indirect and induced impacts to the City, Region, and State. The impacts occur because goods and services are procured locally, salaries are spent locally and, in both cases, local businesses are supported. Based on the input-output model constructed for this analysis, Morgan State University FY 2021 direct expenditures generated approximately: • • •

$341 million in total output, supporting 2,580 direct, indirect and induced jobs and $158 million in earnings within the City of Baltimore; $374 million in total output, supporting 2,740 direct, indirect and induced jobs and $168 million in earnings within the Baltimore MSA; $377 million in total output, supporting 2,740 direct, indirect and induced jobs and $169 million in earnings within the State of Maryland.

Table 1 – Annual Economic Impact of Morgan Operations Economic Impact Baltimore Baltimore MSA Maryland Direct Output ($M) $243 $249 $249 Indirect and Induced Output ($M) $98 $125 $128 Total Output ($M) $341 $374 $377 Employment (FTE) 2,580 2,740 2,740 Earnings ($M) $158 $168 $169 Source: IMPLAN (2015), Econsult Solutions (2021)

Annual Tax Revenue Impact from Annual Operations 1435 Walnut Street, 4th Floor | Philadelphia, PA 19102 215-717-2777 | econsultsolutions.com


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Date: January 21, 2021

Although Morgan is itself a tax-exempt institution, the economic impact of its operations creates significant amounts of tax revenue for the city and state government annually. The City of Baltimore does not levy sales and business taxes, so Morgan’s impact was analyzed only for income tax at the citylevel. Annually, Morgan generates (see Table 2): • •

$3.6 million in total income tax revenue for the City of Baltimore; and $9.4 million in tax revenue, including $7.9 million in personal income tax revenue, $1.0 million in sales and tax use revenue, and $0.4 million in business tax revenue for the State of Maryland.

Table 2 – Annual Tax Revenue Impact from Morgan Operations ($M) City of State of Tax Type Baltimore Maryland Personal Income Taxes $3.6 $7.9 Sales and Use Taxes $1.0 Business Taxes $0.4 Total $3.6 $9.4 Source: IMPLAN (2015), Econsult Solutions (2021)

3

Impact from Capital Investments

In addition to its annual operations, Morgan undertakes significant capital investments each year, including new buildings, major renovations, and maintenance projects. These investments support jobs, create demand for goods and services, and generate statewide tax revenues. Importantly, these investments also help to create a more vibrant community for Morgan students, employees, and residents to enjoy.

Annual Capital Investments Over the last six years, Morgan has spent $197 million on new construction, new equipment and technology, major renovation, and capital maintenance, which equates to $32 million each year. In addition to these direct capital investments, Morgan has also leveraged funds for local development in the surrounding community. Notably, the University played an important role in initiating the $65 million revitalization of Northwood shopping Plaza. In an effort to conservatively estimate third party projects Morgan supported, the overall economic impact includes only Northwood renovations. This adds an additional $11 million in annual capital investments to Morgan’s $32 million in direct investments.

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Date: January 21, 2021

Estimated Economic Impact from Annual Capital Investments It is typical for construction spending to be uneven over time. In order to account for fluctuation in spending, the direct and third party capital investments that made since 2016 have been annualized. Between 2016 and 2021, it is estimated that Morgan spent $43 million per year on capital investments. Morgan’s capital spending has created a temporary economic impact on the local economy as Morgan hired local contractors and vendors. These expenditures have touched a wide base of wholesalers, manufacturers, and professional service providers in addition to construction companies within the state. Each year, Morgan’s investments have generated approximately (see Table 3): • • •

$61 million in total output, supporting 310 direct, indirect and induced jobs with $17 million in earnings within the City of Baltimore; $72 million in total output, supporting 350 direct, indirect and induced jobs with $21 million in earnings within the Baltimore MSA; and $73 million in total output, supporting 360 direct, indirect and induced jobs with $21 million in earnings within the State of Maryland.

Table 3 – Annual Economic Impact of Morgan Capital Investments Economic Impact Baltimore Baltimore MSA Maryland Direct Output ($M) $44 $44 $44 Indirect and Induced Output ($M) $17 $28 $30 Total Output ($M) $61 $72 $73 Employment (FTE) 310 350 360 Earnings ($M) $17 $21 $21 Source: IMPLAN (2015), Econsult Solutions (2021)

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Date: January 21, 2021

Annual Tax Revenue Impact from Capital Investments The economic impact of these capital investments results in additional tax revenue generation for the City of Baltimore and the State of Maryland. This spending generates approximately (see Table 4): • •

$400,000 in total income tax revenue for the City of Baltimore; and $1.8 million in total tax revenue, including $1.0 million in income tax revenue, $400,000 in sales and use tax revenue, and $400,000 in business tax revenue for the State of Maryland.

Table 4 – Annual Tax Revenue Impact from Morgan Capital Investments ($M) City of State of Tax Type Baltimore Maryland Personal Income Taxes $0.4 $1.0 Sales and Use Taxes $0.4 Business Taxes $0.4 Total $0.4 $1.8 Source: IMPLAN (2015), Econsult Solutions (2021)

4

Impact from Student and Visitor Spending

Over and above spending on operating activities and capital investments, Morgan draws out-of-town spending into the city and region from students and visitors that would likely nor occur without the school’s presence. A large category of spending is Morgan visitors, whose spending on lodging, food, and retail stimulates the local, regional and statewide economy. Another large share of ancillary spend is generated by Morgan students, who primarily spend money in a variety of categories during their academic careers. Estimated Direct Student and Visitor Spending Students represent a large category of ancillary spending due to their volume and time spent in Baltimore. While student spending on tuition, on-campus living, and cafeteria food is already reflected in Morgan’s operating budget, student spending off-campus food and entertainment, transportation, and personal supplies represent injections of purchasing power into the regional economy. Using information from Morgan as well as national data on projected total costs for students, ESI has developed updated ancillary spending profiles for its nearly 7,800 on-campus and off-campus students. The total annual ancillary spending by students is over $87 million, although not all of that spending takes place within the local geographies. Morgan also attracts over 72,000 visitors to Baltimore each year who bring spending into the region. But the largest category of visitors comes from visitors who attend athletic events hosted by Morgan. Like students, these visitors come from all over the region and, therefore, their spending can be considered new to the city, region and state. These visitors come from all over the region and spend a significant

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Date: January 21, 2021

amount within the local economy each year, which helps support employment and generate tax revenues for the city and state. In total, it is estimated that visitors to Morgan spend about $6 million each year within the state economy. Table 5 – Ancillary Spending by Morgan Students and Visitors by Geography Type Students Visitors Total Minus Non-Modeled Amount Modeled Amount

Students or Visitors 7,760 72,300 80,060 -

Spending within Baltimore ($M) $45.3 $4.9 $50.2 $14.4 $35.8

Spending within the Baltimore MSA ($M) $82.9 $5.2 $88.1 $24.1 $64.0

Spending within Maryland ($M) $87.1 $5.7 $92.8 $25.7 $67.1

Source: IMPLAN (2015), Econsult Solutions (2021)

While this $93 million in total student and visitor spending takes place outside of Morgan, not all of it occurs within the geographies of interest (City, Region and State). Some of it will occur outside of the select geographies. For instance, a significant amount of retail purchases take place online and similarly a portion of the transportation costs accrue elsewhere. Accounting for these adjustments, it is estimated that Morgan students and visitors represent about $67 million in spending within the state of Maryland each year.

Estimated Economic Impact of Ancillary Spending Student and visitor spending at Morgan are estimated to generate (see Table 6): • • •

$49 million in total output, supporting 310 direct, indirect and induced jobs and $13 million in earnings within the City of Baltimore; $94 million in total output, supporting 590 direct, indirect and induced jobs and $21 million in earnings within the Baltimore MSA; and $103 million in total output, supporting 650 direct, indirect and induced jobs and $24 million in earnings within the State of Maryland.

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Date: January 21, 2021

Table 6 – Annual Economic Impact of Morgan Student and Visitor Spending Economic Impact Baltimore Baltimore MSA Maryland Direct Output ($M) $36 $64 $67 Indirect and Induced Output ($M) $14 $30 $36 Total Output ($M) $49 $94 $103 Employment (FTE) 310 590 650 Earnings ($M) $13 $21 $24 Source: IMPLAN (2015), Econsult Solutions (2021)

The economic impact of this ancillary spending results in additional tax revenue generation for the City of Baltimore and the State of Maryland. This spending generates approximately: • •

$300,000 in total income tax revenue for the City of Baltimore; and $2.3 million in total tax revenue, including $1.1 million in income tax revenue, $800,000 in sales and use tax revenue, and $400,000 in business tax revenue for the State of Maryland.

Table 7 – Annual Tax Revenue Impact from Morgan Student and Visitor Spending ($M) Tax Type Personal Income Taxes Sales and Use Taxes Business Taxes Total

City of State of Baltimore Maryland $0.3 $1.1 $0.8 $0.4 $0.3 $2.3

Source: IMPLAN (2015), Econsult Solutions (2021)

5

Impact from Alumni Wage Premium

The link between educational attainment and earnings power is well-established. A wage premium associated with additional education is often conceptualized and calculated from the perspective of the student, who can compare the costs associated with various educational (or non-educational) options with the expected return. The following analysis utilizes this same framework to estimate the gain not to the student, but rather to the City, Region, and State economies. Additional earnings attributable to Morgan within these geographies are estimated, and translated into additional spending power within the local economy, which supports local employment and earnings. Beyond the educational experience attending Morgan, alumni are able to earn more than they would otherwise earn but for that credential. While Morgan State University has over 45,000 alumni who now live all around the world, many have stayed in Maryland, in the Baltimore MSA, and in the City of Baltimore, where their higher earning potential infuses more spending into the regional economy. This is another important way Morgan strengthens the local and state economy.

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Date: January 21, 2021

Direct Wage Premium To calculate wage premium, it is necessary to estimate the premium a worker with a bachelor’s degree earns over one with an associate’s degree and the premium a worker with a master’s degree earns over one with a bachelor’s degree. The aggregate increase in earning potential within each geography can be estimated as a function of the increases in educational attainment of the workforce. Based on a combination of federal data sources, the annual wage premium attributable to the increased educational attainment for Morgan alumni is estimated to be $24,200 for a bachelor’s degree over an associate’s degree and an additional $27,700 for advanced degree over a bachelor’s degree. These premiums are applied to the volume of Morgan degree holders estimated to be working within each geography by degree level to arrive at an aggregate annual wage premium, which represents the additional household income generated by Morgan alumni as a result of the education and credential they received from Morgan. This aggregate annual wage premium is estimated to sum $214 million within Baltimore, $459 million within the Baltimore MSA, and $535 million in Maryland.

Table 8 – Regionally Inclusive Aggregate Premium Produced by Morgan ($M) Degree Level Baltimore Baltimore MSA Maryland Bachelor's $155.2 $332.0 $387.1 Advanced $59.2 $126.7 $147.7 Total Premium $214.4 $458.8 $534.8 Source: IMPLAN (2015), Econsult Solutions (2021)

Estimated Economic Impact from Wage Premium While the additional earnings by Morgan alumni within the local workforce are highly consequential to those households, their impact on economic activity throughout the City, Region and State occurs when it is re-circulated within the economy. This additional household income represents higher household spending which ripples through these economies, supporting local merchants, local jobs, and the local tax base. Accounting for savings rates, tax withholdings, and spending outside of the City, Region and State, not all of this additional household income circulates locally. However, that income which does has a multiplier effect and supports a wide range of jobs. Each year, the estimated increase in earnings generates significant economic impacts (see Table 9): •

$188 million in total output, supporting 990 direct, indirect and induced jobs and $62 million in earnings within the City of Baltimore;

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• •

$464 million in total output, supporting 2,620 direct, indirect and induced jobs and $142 million in earnings within the Baltimore MSA; and $558 million in total output, supporting 3,140 direct, indirect and induced jobs and $168 million in earnings within the State of Maryland.

Table 9 – Annual Economic Impact from Wage Premium Produced by Morgan Impact Type Baltimore Baltimore MSA Maryland Direct Wage Premium ($M) $214 $459 $535 Total Impact ($M) $188 $464 $558 Employment Supported (FTE) 990 2,620 3,140 Earnings ($M) $62 $142 $168 Source: IMPLAN (2015), Econsult Solutions (2021)

Tax Revenue Impact Attributable to Wage Premium Effects Wage premiums attributable to degrees conferred by Morgan generate additional tax revenues for the City of Baltimore and State of Maryland. In particular, this activity translates into increased income tax revenue (due to increased earnings) and increased sales and business tax revenue (due to increased household spending). In aggregate, the economic activity attributable to wage premium effects generates an estimated $6.2 million in tax revenues within the City of Baltimore and $39.3 million in tax revenues within the State of Maryland on an annual basis. Table 10 – Annual Tax Revenue Impact from Morgan Student and Visitor Spending ($M) City of Tax Type Baltimore Personal Income Taxes $6.2 Sales and Use Taxes Business Taxes Total $6.2

State of Maryland $33.1 $4.3 $2.0 $39.3

Source: IMPLAN (2015), Econsult Solutions (2021)

6

Aggregate Annual Economic Impact

Morgan State University contributes significantly to the regional and state economies through its operations, capital investments, ancillary spending by students and visitors, and the wage premium of Morgan alumni living and working in the region. It is estimated that Morgan produces $1.1 billion in economic impact to the state economy and supports about 6,900 jobs statewide. The economic impact also contributes greatly to the local and state tax bases, generating a total of $9 million in tax revenues for the City of Baltimore and over $53 million for the State of Maryland.

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Date: January 21, 2021

While Morgan exists for educational purposes, fulfilling its mission also produces large and meaningful economic gains. Its investments circulate throughout the economy, spurring additional economic activity and generating considerable tax revenue for local and state governments. In total, Morgan State university produces an aggregate economic impact of: • • •

$640 million in total output, supporting a total of 4,190 direct, indirect and induced jobs and $250 million in earnings within the City of Baltimore; $1.0 billion in total output, supporting a total of 6,300 direct, indirect, and induced jobs, and $352 million in earnings within the Baltimore MSA; and $1.1 billion in total output, supporting a total of 6,890 direct, indirect, and induced jobs and $382 million in earnings within the State of Maryland.

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Date: January 21, 2021

Table 11 – Aggregate Annual Economic Impact of Morgan on the Baltimore Economy, FY 2021

Impact Type Output ($M) Employment Supported (FTE) Earnings ($M) Tax Revenues ($M)

Operation s $341

Capital Investment s $61

Student/Visito r Spending $49

Alumni Wage Premium $188

Total $639

2,580 $158 $3.6

310 $17 $0.4

310 $13 $0.3

990 $62 $6.2

4,190 $250 $11

Source: IMPLAN (2015), Econsult Solutions (2021)

Table 12 – Aggregate Annual Economic Impact of Morgan on the Baltimore MSA, FY 2021

Impact Type Output ($M) Employment Supported (FTE) Earnings ($M)

Operation s

Capital Investment s

Student/Visito r Spending

Alumni Wage Premium

$374

$72

$94

$464

Total $1,00 4

2,740 $168

350 $21

590 $21

2,620 $142

6,300 $352

Source: IMPLAN (2015), Econsult Solutions (2021)

Table 13 – Aggregate Annual Economic Impact of Morgan on the Maryland Economy, FY 2021

Impact Type Output ($M) Employment Supported (FTE) Earnings ($M) Tax Revenues ($M)

Operation s

Capital Investment s

Student/Visito r Spending

Alumni Wage Premium

$377

$73

$103

$558

Total $1,11 1

2,740 $169 $9.4

360 $21 $1.8

650 $24 $2.3

3,140 $168 $39.3

6,890 $382 $53

Source: IMPLAN (2015), Econsult Solutions (2021)

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Date: January 21, 2021

Table 14 – Aggregate Annual Economic Impact of Morgan on the Baltimore Economy, FY 2018

Impact Type Output ($M) Employment Supported (FTE) Earnings ($M) Tax Revenues ($M)

Operation s $302

Capital Investment s $62

Student/Visito r Spending $47

Alumni Wage Premium $163

Total $574

2,400 $144 $3.3

340 $18 $0.4

310 $12 $0.3

900 $54 $5.4

4,000 $227 $9

Source: IMPLAN (2015), Econsult Solutions (2021)

Table 15 – Aggregate Annual Economic Impact of Morgan on the Baltimore MSA, FY 2018

Impact Type Output ($M) Employment Supported (FTE) Earnings ($M)

Operation s $332

Capital Investment s $74

Student/Visito r Spending $89

Alumni Wage Premium $402

Total $897

2,600 $153

390 $21

590 $20

2,400 $123

6,000 $317

Source: IMPLAN (2015), Econsult Solutions (2021)

Table 16 – Aggregate Annual Economic Impact of Morgan on the Maryland Economy, FY 2018

Impact Type Output ($M) Employment Supported (FTE) Earnings ($M) Tax Revenues ($M)

Operation s $334

Capital Investment s $75

Student/Visito r Spending $97

Alumni Wage Premium $484

Total $990

2,600 $153 $8.5

400 $21 $1.8

660 $22 $2.2

2,900 $146 $34.1

6,500 $343 $47

Source: IMPLAN (2015), Econsult Solutions (2021)

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