Sanctions not a death blow to State College economy

The penalties levied by the NCAA earlier this week will have a significant effect on Penn State football, but they may mean relatively little for the overall economy of State College and the surrounding region.

For while college football may generate about $60 million in revenue each year, the university has a statewide annual operating budget of $4.3 billion, employs more than a third of Centre County residents, and attracts 35,000 undergraduate students to its University Park campus.

In the immediate aftermath of Monday's announcement of the sanctions, which are likely to diminish the quality of the football program for a number of years, concerns for the local economy were expressed. But the worries might have been overstated.

Even economic-impact studies commissioned by Penn State in 2009 reveal that the Nittany Lions football team accounts for less than 2 percent of the overall impact of the university statewide. Studies conducted by the Pittsburgh-based consulting firm Tripp Umbach calculated the total business volume impact of football at $161.5 million - compared with the impact of the whole university at $8.48 billion.

"There's no question there will be an economic impact" from the NCAA sanctions, said Joel L. Naroff, an independent economist based in Bucks County. "Is it going to be large? Probably not."

The big reason is that Penn State avoided the so-called death penalty that would have forced the shutdown of football for an entire season. No football, no tourism. With seven home games for a 2012 season that starts Sept. 1, Penn State will still have tens of thousands of fans traveling to the center of the state for each game day.

The question is whether the university can continue to fill its 108,000-seat stadium going forward. Any drop-off in attendance would mean a decline in football revenue to the university, as well as a possible drop in spending at local businesses, Naroff said.

Still, as hard as it can be to get a hotel room or into bars and restaurants on a home football weekend, not all fans spend money beyond parking, tickets and stadium concessions, Naroff noted.

The $60 million NCAA fine (payable over five years at $12 million per season) and the loss of revenue-sharing from bowl games (estimated at $13 million to $15 million a year for four years) is not insignificant for Penn State.

But the penalties are dwarfed by the size of the institution. For example, Penn State, typically among the top 10 institutions nationally in terms of research spending, totaled $805 million in such expenditures in 2011, including $477 million in federal funds.

Penn State is the biggest employer in Centre County - much as the University of Pennsylvania is in Philadelphia. The state-related university had 23,186 employees in 2010, accounting for 36.1 percent of the county's overall employment, according to a recent county bond document. The county's second-biggest employer was Mount Nittany Medical Center, with 1,421 employees.

As metropolitan economies go, State College is far from diverse. In current dollars, State College's metropolitan gross domestic product was $6.1 billion in 2010, ranking it No. 236 nationwide, according to the federal Bureau of Economic Analysis. The Philadelphia metro area recorded GDP of $346.9 billion.

However, State College's economy grew twice as fast as the Philadelphia area's. From 2009 to 2010, the metro GDP of Centre County grew at 5.4 percent, making it the nation's 24th-fastest-growing economy. Philadelphia grew at 2.3 percent, good enough for 159th place, according to BEA.

Additionally, State College routinely posts the lowest unemployment rate of all metropolitan statistical areas in Pennsylvania. In May, its jobless rate was 5.5 percent, according to data seasonally adjusted by the Federal Reserve Bank of Philadelphia. In contrast, Pennsylvania's jobless rate was 7.4 percent in May, while Philadelphia's was 8.2 percent.

That doesn't mean local officials in State College aren't concerned about possible economic damage from the Jerry Sandusky child-abuse scandal and the resulting NCAA sanctions.

James C. Steff, executive director of Centre Region Council of Governments (COG), said he attended two separate municipal meetings this week at which a range of opinions was expressed on the possible severity of the sanctions. No consensus emerged, he said.

Steff said officials there will be watching five sectors of the economy for clues of stress: hospitality, retail, construction, vendors of the Penn State football team, and public works projects, which may be delayed because of a lack of confidence that growth trends will continue.

George Arnold, executive director of the Downtown State College Improvement District, said word that Penn State would play football this season was greeted as good news. "Earlier, there was a little bit more concern before the NCAA sanctions came out," he said.

As for how those sanctions will affect university operations, Larry Cata Backer, chairman of the faculty senate, noted that Penn State is in "uncharted territory."

Backer, who said in an e-mail that he was speaking only on behalf of himself, said the impact from the NCAA sanctions on the football team "will touch all university stakeholders and those who make their livelihoods in university events-related fields."

A Penn State law professor, Backer said the purpose of financial sanctions "is to cause financial pain. In deeply economically integrated societies, like that of the United States, severe financial sanctions will necessarily have a ripple effect."

Before the Sandusky scandal broke, COG, which comprises municipal officials from State College Borough and five surrounding townships, conducted an assessment of the economic-development activities of the region. It was undertaken after yearbook publisher Jostens Inc. announced the closing of its Centre County factory, eliminating more than 200 jobs.

Steff said officials have long believed that the region had become "overly reliant" on Penn State for economic growth. "This has really brought it home," he said.

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