Appendix C: FAQs WHAT IS AN ECONOMIC-CONTRIBUTION ANALYSIS? Technically, this study is a contribution analysis. The study quantifies the economic contribution of the university in terms of economic impact, jobs, and local and state tax revenue. The study calculates how spending by employees, visitors, and students contributes to the economy of South Dakota and beyond. It examines how expenditures create additional impact in the economy directly and through the multiplier. For the purposes of this study, an economic contribution is defined as the gross changes in South Dakota’s existing economy that can be attributed to the universities. Contribution analysis is a descriptive analysis that tracks gross economic activity: how spending by the university and its constituencies cycles dollars through the economy. The university’s economic-contribution analysis does not consider how spending at this university may crowd out spending at another college or university within the state. This type of analysis is one of the most common that is performed and is often mislabeled as an economic-impact study. Please note that while the terms used to express the contribution of South Dakota to the statewide economy are referred to as economic impact, this is a contribution analysis. Spending by students, staff, and faculty who are explicitly participating in activities associated with South Dakota’s output represents a “stemming-from effect” and could also be considered a direct effect of the higher-education industry. For example, a student who attends classes and spends $10 on lunch at a local restaurant is a stemming-from effect of the university. This contribution analysis then follows the direct economic activity and associated stemming-from effects through the economy, with the output of each sector broken down and attributed to expenditures on intermediate inputs or to value-added components such as labor, taxes, and returns to capital. Output multipliers, which are sector- and region-specific, are derived from the appropriate model and relate an industry’s economic activity (or changes in the industry’s economic activity) to gross sales in the other sectors of the regional economy. The contribution analysis does not account for the fact that if a student attending class were a local resident, then the $10 they spent on lunch potentially represents $10 they are not spending at another restaurant elsewhere in town. The direct effect in a contribution analysis includes purchases by students from in and out of state and is neither a measure of changes to the state’s economic base nor a measure of the value added to the region above what was paid to input suppliers. WHAT SHOULD YOU REMEMBER ABOUT THE STUDY WHEN YOU READ IT? • It is a point-in-time calculation of impact for FY 19. • It quantifies the amount of impact that the universities produce each year. • The economic numbers can fluctuate from year to year based on operational spending, capital spending, pay and benefits, number of employees, number of students, and state appropriation. • This is an economic-contribution analysis that casts a broader net to calculate impact than an economic-impact study. • These are conservative numbers and adhere to industry-respected protocols. 20