Thursday, July 31, 2014
Inquirer Daily News

For Penn, playing the role of Goliath

One reason the Davids of the world are the focus of so many tales of success: Almost no one empathizes with Goliath.

For Penn, playing the role of Goliath

One reason the Davids of the world are the focus of so many tales of success: Almost no one empathizes with Goliath.

But it's intriguing when Goliaths seek to sell their point of view, because the bait is usually the same - an economic-impact report.

I'm no fan of these reports, which can provide crumbs of information about the actual spending and employment of a business, event, or nonprofit organization. The trouble is those hard facts are obscured by larger assumptions about indirect spending, indirect job creation, and other intangibles. 

The giant seeking to burnish its image this week was the University of Pennsylvania with a report that all but says: "Look at how much I've done for you."

Penn has been Philadelphia's biggest private-sector employer for years. No other private-sector company or nonprofit even comes close to Penn's more than 31,000 employees distributed across its Ivy League campus and top-notch health system. It has spent hundreds of millions of dollars on new buildings in the last decade, and many for-profit businesses feed off the student body and employees.

The executive summary posted on Penn's website is little more than a slide show with pictures, charticles, and lots of big numbers. This is a Twitter feed with numbers that seem impressive at first but, on further reflection, lack context.

Blame the brochure feel on the response Penn officials received five years ago when they simply released a 40-page report filled with econo-speak.

The clear message this time is that the university and health system were able to keep growing during a "pretty tough" economic period, said Craig Carnaroli, Penn's executive vice president.

As big as Penn is, an economic-impact report remains important to remind lawmakers and others of how it contributes to the overall economy, Carnaroli said. "Our success is interdependent with the city."

Without a doubt, Penn has a huge direct impact on Philadelphia and the region. Penn is also Pennsylvania's second-largest private-sector employer, behind only Wal-Mart Stores Inc.

Penn listed its operating expenditures for fiscal 2010 as $5.2 billion statewide,  all but $100 million of that spent in the city. Its activities generated $172 million in city taxes, including $144 million in wage tax, $9 million in sales tax, and $19 million in business-privilege tax.

With stats like that, it really has no need to pump itself up with the statistical steroids associated with "multipliers," or estimates, that produced figures of $14.0 billion in direct and indirect spending and 145,500 direct and indirect jobs statewide. (Penn says it will provide a copy of the complete report on request.)

A paper published in the October 2007 edition of the Economics of Education Review journal about the economic impact of colleges and universities, by Vanderbilt University economics professor John J. Siegfried and two others, skewered much of what goes into such impact reports. Their key problem is they rarely explain what a city or region would be like without the institution being studied.

As Siegfried told me in an e-mail, if Penn were not here, how many students would attend a college in Philadelphia and how much of Penn's research would go to other institutions here?

To Stephen P. Mullin, senior vice president of Econsult Corp., which conducted the research for Penn's current impact report and the one five years ago, those are exactly the points to highlight. The university imports a lot of students, researchers, faculty, and federal funding that likely would not seek out Philadelphia.

Mullin said that, when done well, an economic-impact report could show how intertwined an institution was with the economy at large.

Fair enough, but I'm not budging.

I realize it's already passe to be concerned about institutions that are too big to fail. However, based on the 7.7 percent annual growth rate in economic impact in Penn's report, is it in the city's interest for Penn to be 10 percent, 20 percent, or 50 percent larger 10 years from now? Can we have too much of a good thing?

Economic-impact reports such as this one tend to appear when an institution needs to remind public officials and policymakers of the value produced by it.

With Arlen Specter gone from the U.S. Senate and Ed Rendell now Pennsylvania's former governor, Penn lost two great rainmakers in high places. The red ink dripping from budgets at the state and federal levels may mean Goliath will have to skip a meal or two in the next year or two.

Armed with its latest economic-impact report, Penn should do fine shielding itself from any projectiles launched by any public-sector opponent's slingshot.

 


Contact columnist Mike Armstrong at 215-854-2980 or marmstrong@phillynews.com. See his blog at www.phillyinc.biz

 

 

 

Mike Armstrong Inquirer Columnist
About this blog
Mike Armstrong blogs about Philadelphia corporations and business-related topics. Contact him at 215-854-2980. Reach Mike at marmstrong@phillynews.com.

Mike Armstrong Inquirer Columnist
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