Economic Impact of Oklahoma National Guard

Transcription

1 Economic Impact of Okahoma Nationa Guard Prepared By: Fui Ting Phang Center for Economic & Business Deveopment at Southwestern Okahoma State University 2014 Director: Doug Misak

2 Center for Economic & Business Deveopment W N S Southwestern Okahoma State University E Executive Summary When catastrophe strikes, Okahomans know that the Okahoma Nationa Guard wi soon arrive to rescue, recover, and restore. But the Guard is aso an integra part of the Okahoma economy, empoying more than 13,000 Okahomans and pumping more than a biion doars into the state economy annuay. To raise awareness of the Guard s contributions, this report was commissioned by the Okahoma Army and Air Nationa Guard to quantify and better understand the economic impacts of the Guard upon the state and the regiona economies. Data inputs used for the forecast were provided by the Okahoma Nationa Guard. Using the Okahoma REMI mode, a 70-sector mode was deveoped with detaied empoyment, gross state product, output and other data specific to Okahoma. This report highights empoyment, gross state product, output, popuation, income, capita stock, and tax impacts that the Guard has upon the state of Okahoma. Based on the resuts of the study, the Okahoma Nationa Guard has substantia impacts on the statewide economy. Over the modeed time frame, the Okahoma Nationa Guard was shown to positivey impact: State Output by an annua average of $2.535 biion State Empoyment by an average of 13,557 jobs annuay Gross State Product by an annua average of $1.288 biion State Rea Disposabe Persona Income by an annua average of $ miion 2 Southwestern Okahoma State University s Center for Economic & Business Deveopment

3 Okahoma Nationa Guard Like most of the United States during the Great Recession of the ast decade, the Okahoma economy was negativey impacted, osing 56,000 jobs, and overa 3.56 percent drop. As officias strugged with the economic downturn, traditiona cornerstones of state business such as manufacturing, heath care, and energy progressed steadiy in reviving the economy. Aso making a significant contribution is pubic service, incuding the Okahoma Nationa Guard. The Okahoma Guard s pace in the state economy is incuded in its stated mission: The Okahoma Nationa Guard provides trained and ready forces in support of the Nationa Miitary Strategy; responds as needed to State, oca, and regiona emergencies to ensure peace, order, and pubic safety; and adds vaue to our communities through responsive miitary service. The Okahoma Nationa Guard has two missions, the state mission and the federa mission. When caed upon by the Governor, the forces are acting as a state miitia but when caed upon by the President or during dri and annua training; the forces are acting in a federaized capacity. The Okahoma Nationa Guard is comprised of the Army Nationa Guard and the Air Nationa Guard. The Guard s physica presence throughout the state creates jobs both directy and indirecty. Besides actua empoyment, the Guard s faciities and activities have a tricke-down effect that benefits Okahoma communities by adding to saes tax coections, capita stock, and persona income. Most significant is the mutipier effect for the number of secondary jobs the Guard supports in the wider economy. For every 100 empoyed by the guard, statewide empoyment woud increase by an additiona 227 jobs. This means, shoud OKNG increase empoyment by 100 jobs, the Okahoma economy woud experience an increase of 127 indirect jobs. The empoyment effect of 100 jobs at OKNG and 127 additiona jobs creation generate tota empoyment of 227 jobs. The added economic activities triggered by the Guard s empoyment have consideraby strengthened the state s economy. This study quantifies the economic impact of Guard on the state of Okahoma as a whoe and then considers the impact on one state region, the Southeast. The study shows significant economic impacts of the Guard on Okahoma s economic deveopment, with the economic benefits bringing about continuous prosperity and stabiity to Okahoma s economy. Economic Impact of Okahoma Nationa Guard 3

4 Contents Executive Summary 2 Introduction: Okahoma Nationa Guard 3 Economic Impact Anaysis Methodoody 5 Project Information and Assumptions Gross State Product Impact Rea Disposabe Persona Income Impact State Output Impact Empoyment Impact Capita Stock Impact Popuation Impact Propritors Income Impact Tax Impact Concusion 22 Reference 23 4 Economic Impact of Okahoma Nationa Guard

5 Economic Impact Anaysis Methodoogy Regiona Economic Modes, Inc. (REMI), based in Amherst, MA, produces economic modeing software that enabes users to answer what-if questions about their respective economies. Each REMI mode is taiored for specific geographic regions by using data, incuding empoyment, demographic, and industry data, unique to the modeed region. The Center for Economic & Business Deveopment uses the Okahoma REMI mode, which is a six-region, 70-sector REMI mode, to forecast how a given economic activity or poicy change occurring in one region woud affect that region, a group of regions, and/or the state. The REMI simuation mode uses hundreds of equations and thousands of variabes to forecast the impact that an economic/poicy change woud have upon an economy. Basicay, the REMI mode measures this economic impact by first forecasting the region s performance as if there were not any changes (the contro forecast), and then forecasting the region s/ state s performance if the economic activity occurred (the aternative forecast). The difference between the two forecasts represents the economic impact of the economic activity upon the region, group of regions, and/or the state. It is this economic impact that wi be reported in the Economic Impact Anaysis section of this report. A basic graphic representation of some of the inkages in the economic modeing software is presented beow. As can be seen, the REMI mode contains five bocks. Each bock has its own variabes and interactions so REMI Linkages (Excuding Economic Geography Linkages) [1] Output State & Loca Government Spending Output Consumption Spending Investment Spending Net Exports Rea Disposabe Income [3] Demographic [2] Labor & Capita Demand Migration Popuation Optima Empoyment Capita Stock Participation Rate Labor Force Labor / Output Ratio [5] Market Share Domestic Market Share Internationa Market Share [4] Wages, Prices, and Production Costs Empoyment Opportunity Wage Rate Composite Wage Rate Production Costs Housing Price Rea Wage Rate Composite Prices Southwestern Okahoma State University s Center for Economic and Business Deveopment 5

6 Economic Impact Anaysis Methodoogy that changing any one variabe in the mode not ony affects other variabes in its own bock but aso variabes in other bocks. For exampe, if XYZ Corporation expanded its operations in Okahoma City by hiring an additiona 100 new empoyees, then that initia empoyment increase woud utimatey affect output, popuation, migration, wage rates, etc. It is through the mode s inkages and interaction that Empoyment (in Bock 2) directy affects Optima Capita Stock (Bock 2), Empoyment Opportunity (Bock 4), and Rea Disposabe Income (Bock 1). The empoyment gain works its way through the mode to affect each of the other variabes, as expained in depth beow. Empoyment s effect upon Optima Capita Stock: Increases in empoyment gain in turn increases optima capita stock because: Some new empoyees wi demand newy constructed houses. Physica capita wi be required to assist the abor to produce output. Optima Capita Stock then interacts with Actua Capita Stock (not shown) to affect the eve of Investment (Bock 1) in the mode, which utimatey increases Okahoma City s Output (Bock 1). When compared to Actua Capita Stock, Optima Capita Stock spurs investment in the region because the difference represents unfufied demand for physica capita. Aso, Output (Y) increases because it is equa to the sum of persona consumption (C), state and oca government spending (G), investment (I), net exports from region (X-M), as we as demand for intermediate inputs. Empoyment s effect upon Empoyment Opportunity: Based on the hypothetica 100 additiona empoyees mentioned above, this gain in Empoyment wi positivey affect Wage Rates (Bock 4) if the region s empoyment is growing faster than the region s Labor Force (Bock 3). Wage rates interact with the Consumer Price Defator, which is an adjustment factor accounting for differing infation rates in various regions, to affect rea wage rates (Bock 4). As compared to another region, higher rea wage rates in one region serve as an incentive for peope to move between geographic regions; thus, rea wage rates affect migration (Bock 3). Empoyment s effect upon Rea Disposabe Income: Because jobs are created, income paid to the new empoyees aso increases. The newy empoyed wi save a portion of their income and spend a portion of their income on consumer goods, the atter of which increases Consumption (Bock 1). As a component of output, increased persona consumption produces a subsequent rise in Output. Obviousy, the previous exampe is ony a simpe iustration of a more compex mode. For more information about the REMI mode and its equations, pease read Regiona Economic Modeing by George Treyz (Kuwer Academic Pubishers, 1993). 1 6 Economic Impact of Okahoma Nationa Guard upon Okahoma

7 Economic Impact Anaysis Methodoogy Given the previous basic iustration of the REMI mode, the process that the REMI mode uses to forecast the economic impact of a poicy change can be iustrated. The process begins with a poicy question and concudes with a comparison between a contro forecast and an aternative forecast. The accompanying diagram assists with the iustration. A contro forecast, which uses current data regarding the economy, is generated by the REMI mode. The contro forecast represents the projection of the economy into the future, with other things remaining constant (ceteris paribus). This means that future economic growth wi foow simiar patterns in the future as had been experienced in the past. The aternative forecast aows the user to input variabe changes to occur in future time periods. Ony those variabes that woud be affected by the poicy change being measured woud be changed in the aternative forecast. The REMI mode then forecasts economic performance based upon the poicy variabe changes. The difference between the aternative and the contro forecasts, measured by the distance between the two forecast ines, represents the economic impact of the poicy change upon the economy. If the aternative forecast is greater than the contro forecast, then a positive economic impact resuts for the economy. A negative economic impact resuts shoud the aternative forecast be ess than the contro forecast. Forecasting Economic Impacts with the REMI Software Poicy Question What What woud woud be tthe he economic e conomic impact impact upon OOkahoma from the t he expansion of of ABC Corporation Estabishment in the in Tire Manufacturing Pubic Administration industry? sector? Externa Input Increased Increased e empoyment / / output output variabes variabes i n in the Pubic Tire MAdministra- tion sector and and baseine baseine vaues vaues f or for a anufacturing industry other a other externa externa poicy poicy variabes. variabes. REMI Mode Externa Input Baseine vaue for externa poicy p oicy variabes. variabes. Aternative Forecast Contro Forecast 1,975 1,975 1,769 1,975 1,769 Year 1 Year 2 Year 3 Year 4 Year 1 Year 2 Year 3 Year 4 1,769 Year 1 Year 2 Year 3 Year 4 Southwestern Okahoma State University s Center for Economic and Business Deveopment 7

8 Economic Impact Anaysis Methodoogy As is observabe from the accompanying map, the state of Okahoma is divided into six regions in the REMI mode used by the CEBD. They are: Northwest Okahoma, Northeast Okahoma, Southwest Okahoma, Southeast Okahoma, the Okahoma City metro area, and the Tusa metro area. The Okahoma City metro area and the Tusa metro area correspond to the Metropoitan Statistica Areas (MSAs) defined by the Office of Management & Budget. The Office of Management & Budget (OMB) defines metropoitan areas in the United States based upon the size of the economies and commuting patterns. The two argest MSAs by popuation in Okahoma are Okahoma City MSA and Tusa MSA. As defined by the OMB, the Okahoma City MSA comprises seven counties (Canadian, Ceveand, Grady, Lincon, Logan, McCain, and Okahoma counties), and the Tusa MSA comprises seven counties (Creek, Okmugee, Osage, Pawnee, Rogers, Tusa, and Wagoner counties). 2 Additionay, any of the regions may be combined with any combination of the other regions to produce a userdefined region for the purposes of measuring economic impact. For exampe, if an economic impact were to be quantified for Eastern Okahoma, then the three regions of Northeast Okahoma, Southeast Okahoma and the Tusa metro area woud be combined to be reported as Eastern Okahoma. This report deineates the economic impact of Okahoma Nationa Guard on the state of Okahoma as a whoe (see map beow). Okahoma REMI Regions Northwest Okahoma Northeast Okahoma Southwest Okahoma Southeast Okahoma OKC MSA Tusa MSA 8 Economic Impact of Okahoma Nationa Guard upon Okahoma

9 Economic Impact Anaysis Methodoogy It is important to note that whie economic impact anaysis is a vauabe too for economic deveopment, economic impact anaysis does have imitations. Resource Systems Group, Inc. identified some of the imitations of its economic impact anaysis too. Those imiting factors that pertain to REMI-modeed economic impact anaysis are: Economic impact anaysis cannot determine whether a new economic activity/project is economicay feasibe or profitabe. It is possibe that projects with very arge favorabe economic impact may be unprofitabe. 3 Economic impact anaysis cannot identify the specific individuas or the ocation of individuas or businesses impacted. For exampe, the anaysis may show that a specific number of jobs wi be generated in the trucking industry, but it cannot determine if those jobs wi be fied from a specific town. 3 Economic impact anaysis cannot determine whether the outcomes of an economic activity are sociay or environmentay beneficia. Regarding the first point, the purpose of economic impact anaysis is not to determine whether a new economic impact activity is profitabe. Rather, the purpose of economic impact anaysis is to quantify the impact of the new economic activity upon an economy. Other assessment toos, ike market feasibiity studies or cost/benefit anayses, can hep decision-makers determine whether an economic activity/project is profitabe. Regarding the second point, athough the economic impact cannot identify a specific company or city, the REMI mode can forecast the region in which the economic impact wi occur. With the state divided into six regions, the eve of detai is greater in the REMI mode than with other economic impact anaysis modes. Regarding the fina point, Resource Systems Group, Inc. reported that economic impact anaysis can ony dea with impact that is easiy quantifiabe in doars or empoyment. Environmenta, heath, or socia impacts are not normay assessed, even though they may have economic impications. 3 Whie this may be a imitation of IMPLAN-modeed economic impact anaysis, this is not a imitation with REMI-modeed economic impact anaysis. Admittedy these externaities are not easiy quantifiabe, but they may sti be quantified through the use of we-formed surveys. With a quantifiabe amount associated with the externaity, its impact may then be modeed through an additiona simuation. At east one other imitation when measuring the economic impact upon a region is not mentioned in the Resource Systems Group, Inc. report. That imitation reates to using aggregated industry data to measure economic impact. Most economic impact toos use historica data to mode future events. Some of the historica data is aggregated in order to make the modeing too more affordabe and user-friendy. Using aggregate industry data to mode the economic impact of a specific company requires the assumption that the specific company is a good sampe of the aggregate of the whoe industry. Lasty, economic impact anaysis is not the same too as a cost-benefit anaysis. A cost-benefit anaysis quantifies a of the costs, incuding socia and environmenta costs, and a of the benefits associated with a project. If the ratio of benefits to costs is greater than 1.0, then this becomes the basis for approving a project. Economic impact anaysis does not have any threshod associated with the too. Rather, the REMI-modeed economic impact anaysis wi forecast quantifiabe amounts of empoyment, popuation, income, etc., over a range of years for any region. These quantifiabe forecasts can then be used with other toos, incuding cost-benefit anayses and feasibiity reports to assist in the decision-making process. Southwestern Okahoma State University s Center for Economic and Business Deveopment 9

10 Economic Impact Anaysis Methodoogy Separate from the imitations of economic impact anaysis, there are unique imitations to the REMI mode. Every economic impact mode attempts to simuate rea word conditions, and every economic impact mode has its own unique weaknesses. The primary weakness of our REMI mode is that the geographic regions in the mode cannot be disaggregated further. This means that our version of the REMI mode cannot forecast the economic impact upon smaer regions. Specificay, the six regions cannot be broken into the counties comprising their respective region. The reader shoud bear in mind that every mode has its weaknesses, and, whie it is not the purpose of this report to ist the reative strengths and weaknesses of each of the economic impact modes, we want to be as transparent as possibe regarding the REMI modeing software used by the CEBD. One of the key features differentiating the REMI simuation mode from other economic impact measurement toos is the fact that REMI uses severa economic impact methodoogies to predict impact upon an economy. Whereas other toos rey upon one methodoogy to predict economic impact, REMI combines severa economic impact methodoogies, which has the effect of minimizing the weaknesses of any one methodoogy. Methodoogies incuded in the REMI mode are input-output, econometric equations, economic-base, and aspects of computabe genera equiibrium. An additiona strength of the REMI mode invoves its dynamic nature. Economic impact modes reying soey on input-output are abe to make ony static oneyear forecasts. The REMI mode is abe to forecast the economic impact over a number of years. Aso differentiating the REMI mode from other economic impact modes is its abiity to report the economic impact with a myriad of economic and/or demographic variabes. This means that not ony wi traditiona economic impact variabes (for exampe, empoyment, income, gross regiona product, etc.) be reported by the REMI mode, but the mode is aso abe to report other economic and socioeconomic variabes (for exampe, capita stock, economic migrants, popuation by age/ gender, etc.) as we. By forecasting nontraditiona economic and socioeconomic variabes, the REMI mode provides a more compete picture of the impact a given scenario woud have upon an economy. 10 Economic Impact of Okahoma Nationa Guard upon Okahoma

11 Project Information and Assumptions This section documents key scenarios and assumptions that serve as primary inputs into the REMI mode for the purposes of estimating incrementa impact of Okahoma Nationa Guard on Gross Regiona Product (GRP), Output, Empoyment, Income, Taxes and more. The REMI mode is a dynamic input-output modeing software that generates forecasts based on historica data. The primary nationa, state, and county data came from the Bureau of Economic Anaysis (BEA). Other major sources of historica data were obtained from the U.S. Census Bureau, Bureau of Labor Statistics (BLS), State Empoyment Security Agencies (ESAs), Energy Information Administration and other reated sources that serve as the foundation upon which to forecast future economic and socioeconomic variabes. A data inputs were provided by the Okahoma Nationa Guard (OKNG). Two compementary scenarios were deveoped in this study. The first scenario, a counterfactua anaysis, invoves the existing empoyment of the Okahoma Nationa Guard. The second scenario deineates a new constructions of Okahoma Nationa Guard. Variabe inputs into the REMI mode incude empoyment, wage adjustment, productivity adjustment, construction expenditure and equipment cost. In order to mode the economic impact of premises that presenty exists in the economy, it is necessary to remove data associated with that entity from the modeing software in the current year and the projected future years. As a resut, the subsequent forecast produces negative impact when compared to the contro forecast. This approach is known as a Counterfactua Modeing. In order to expain the positive impact that the business woud have upon the economy, the resuts obtained were mutipied by negative one, which ater refers to as a counterfactua positive simuation. This type of simuation assumes any doars/ jobs removed from the mode wi not be re-spent or re-empoyed esewhere in the economy. Empoyment data obtained from the Okahoma Nationa Guard is used to run the forecast simuation. Okahoma Nationa Guard comprises two major components, Okahoma Army Nationa Guard (OKARNG) and Okahoma Air Nationa Guard (OKANG). OKARNG s members are based across the state in six different regions, whie OKANG has two main bases across the state mainy in Okahoma City MSA and Tusa MSA. There are different categories of empoyees in OKNG, these incude federa technicians, Active Guard and Reserve (AGR), traditiona guardsmen, Active Duty Operation Support (ADOS), and State Active Duty (SAD), civiians and state and oca empoyees. Some federa technicians have dua-status. They are unique federa empoyees that are required to maintain miitary status as a condition of their civiian jobs. Dua-status technicians are covered by both Tite 5 and Tite 32. Unike the other federa technicians that are covered ony under Tite 5, duastatus technicians are required to wear a miitary uniform as a condition of their empoyment, and they are exempt from overtime pay, seniority, and Merit Systems Protection Board rights that other federa workers woud have. OKARNG has 538 federa technicians of which 25 are non-dua status. With this figure, 66 technicians are based in NE Okahoma; 1 technician in NW Okahoma; 312 technicians in Okahoma City MSA; 38 technicians in SE Okahoma; 36 technicians in SW Okahoma; and 85 technicians Economic Impact of Okahoma Nationa Guard upon Oahoma 11

12 Project Information and Assumptions in Tusa MSA. OKANG has a tota of 538 dua status federa technicians; 234 jobs are based in Okahoma City MSA; and 304 jobs in Tusa MSA. Service in the Nationa Guard as a fu time AGR sodier is amost excusivey under the authority of 32 USC 502(f) known as operationa Tite 32. Currenty, OKARNG has 563 AGRs. Tota AGRs are further disaggregated in six regions; 38 AGRs in NE Okahoma; 3 in NW Okahoma; 407 in Okahoma City MSA; 37 in SE Okahoma; 21 in SW Okahoma; and 62 in Tusa MSA. On the other hand; OKANG consists of 239 AGRs; with 99 AGRs based in Okahoma City MSA; and 140 in Tusa MSA. There are three 06/COL Tite-10 officers (USPFO, Sr. Army Advisor, and IG), and two 05/LTC Tite-10 officers. These officers serve to provide trained units and quaified persons avaiabe for active duty in the armed forces, war or nationa emergency. Traditiona guardsmen, on average, work 16 hours per month, in addition to fifteen annua training days (102 hours) per year. These part-time guardsmen are augmented by fu-time AGRs or technicians of OKARNG and OKANG. OKARNG has a tota number of 8,351 traditiona guardsmen and OKANG has 1,672 guardsmen. These amounts are transated into fu-time equivaent jobs of 1,193 guardsmen in OKARNG and 239 guardsmen in OKANG, which have served as the empoyment inputs into the simuation. The 1,193 guardsmen of OKARNG are further distributed on six regions; 97 fu-time equivaent jobs are ocated NE Okahoma; 22 in NW Okahoma; 366 in Okahoma City MSA; 108 in SE Okahoma; 68 in SW Okahoma; and 176 in Tusa MSA. OKANG s traditiona guardsmen are based mainy in two regions, 95 guardsmen in Okahoma City MSA, and 144 guardsmen in Tusa MSA. Active Duty Operation Support with reserve component (ADOS-RC) usuay supports training sites, study group, short-term projects, administrative or support functions. OKNG has as many as 1,916 guardsmen in this category of which 173 peope are based in NE Okahoma; 12 in NW Okahoma; 1,064 in Okahoma City MSA; 265 in SE Okahoma; 78 in SW Okahoma; and 324 in Tusa MSA. State Active Duty (SAD) can be activated by the Governor in response to natura or man-made disasters or Homeand Defense missions. In FY 12, there were 353 guardsmen caed up for active duty, however, no documented record of hours worked on the state active duty. In order to avoid doube counting the impact, the study derived fu-time empoyment figures through abor productivity measurement. The tota expenditure spent on SAD mission in FY 12 was $6,014,300. The study assumed this amount is equay distributed across the six regions, which equas to $1,002,383 per region. This amount was ater used to derive abor productivity of guardsmen on each region, which transated into 81 fu-time equivaent empoyment. The fu-time empoyment of 81 jobs serve as the input into the REMI simuation, with 14 jobs based in NE Okahoma; 15 jobs in NW Okahoma; 12 jobs based in Okahoma City MSA; 14 jobs in SE Okahoma; 13 jobs in SW Okahoma; and 13 jobs in Tusa MSA. Other empoyment of OKNG incudes state and oca empoyment of 370 jobs (368 fu-time and 2 part-time), with 127 jobs in NE Okahoma; 1 in NW Okahoma; 151 in Okahoma City MSA; 1 in SE Okahoma; 5 in SW Okahoma; and 83 in Tusa MSA. Civiian empoyment comprises 305 jobs ocated in Okahoma City MSA. 12 Economic Impact of Okahoma Nationa Guard upon Okahoma

13 Project Information and Assumptions The study aso assumes a conservative annua wage increment of 1.5 percent to cope with the rising infation. Construction inputs incude remodeing project and new constructions from 2012 onwards. The Ardmore readiness center woud account for a tota expenditure of $23.2 miion. Of this amount, construction cost woud tota $22 miion, and $1.2 miion woud be spent on producer s durabe equipment. The other construction projects accounted for were $2,214,158 in SE region; $3,031,798 in SW region; $4,155,443 in NE region; $2,610,887 in Okahoma City MSA; and $3,352,481 in Tusa MSA. The new Ardmore readiness center is projected to hire 18 fu-time guardsmen of either AGRs or federa technicians, and 321 part-time driing members (equa to 46 fu-time members) as traditiona guardsmen. As previousy mentioned, the REMI mode reies on historica data to forecast the economic impact. This data was obtained from different sources and each of these sources use different measurements to report the monetary figures. BEA has reported Gross Domestic Product (GDP) and its aggregate fina demand components in chained rea doars, whie BLS uses fixed rea doars for data that are at the most detaied eve. In order to reconcie these two sets of variabes, a rea doar concepts used in the mode are based on fixed weights. This aows the industry vaue added and fina demand totas to remain baanced. To avoid any confusion, a monetary figures of the economic impact reported are presented in current doars. Current doar is the vaue of a doar at the time at which it is measured. The graphs shown from page 14 to page 23 represent the aggregated economic impact (direct, indirect, and induced impact) of the OKNG on Okahoma s economy. The contro forecast predicts the economic and demographic variabes into the future, if nothing changes (ceteris paribus) in the economy. The aternative forecast predicts the same variabes for the economy with given economic stimui, which in this case refers to OKNG s data inputs. The difference between the two (contro forecast and aternative forecast) concudes the economic impact that the stimui have upon the state over the study time period, if OKNG had been the ony stimuus that occurred in the economy and ceteris paribus (with other things remain constant). Economic Impact of Okahoma Nationa Guard upon Oahoma 13

14 1. Gross State Product Impact Economic Impact Forecast Time Frame: Gross State Product (GSP) is anaogous to the nation s Gross Domestic Product (GDP) and to the region s Gross Regiona Product (GRP). It serves as a barometer to gauge the state s economic webeing by measuring the monetary vaue of a fina goods and services produced within the state s economy. The difference between GSP and state output is that GSP does not incude the vaue of intermediate goods and services produced; whie state output is a broader measure of the state s economic activities that incudes the vaue of intermediate goods and services produced (see page 16). The economic impact of OKNG upon GSP can be deineated by four components of spending, which incude consumption spending, government spending, investment spending and net export (export minus import). These spendings are aggregated to cacuate the GSP. Over the five-year time frame, the tota economic impact of OKNG upon GSP woud tota $6.442 biion. The average economic impact that OKNG woud generate is projected to equate $1.288 biion annuay, representing an average increase of 2.27 percent per annum. Tota Gross State Product Impact Consumption Government Spending Spending Investment Spending GSP Impact Forecast (biions of current $) 2014 $ $ $ $ $1.343 REMI mode projects the baseine GSP (without OKNG) to be $ biion in 2014, if nothing changes in the economy. This amount woud surge to $ biion with the addition of OKNG in Okahoma s economy, which spe out a significant impact of $1.228 biion. Simiary, the REMI mode forecasts Okahoma s initia tota GSP to be $ biion in 2018, if OKNG does not exist. This amount is projected to rise to $ biion on GSP, yieding a positive economic impact Okahoma s economy. The projection mirrors an increase of $1.343 biion, signifying signifying an increase of 9.4 percent on GSP impact since Net Export $6.442 biion $250 Economic Impact of Gross State Product (Biions of Current $) $200 $150 $100 Without OKNG With OKNG $50 $ Economic Impact of Okahoma Nationa Guard upon Okahoma

15 2. Rea Disposabe Persona Income Impact Economic Impact Forecast Time Frame: Rea disposabe persona income represents the after-tax, infation-adjusted income that can be saved and spent by income earners. Rea disposabe persona income is directy affected by disposabe persona income, so a change in rea disposabe persona income wi ead to a change in persona consumption. In REMI s terms, an increase in rea disposabe income can be caused by an increase in disposabe persona income or decrease in PCE-Price index. With the existence of OKNG, increased empoyment has resuted in increased higher rea disposabe persona income. REMI mode predicts the rea disposabe persona income to be $ biion in 2014, if nothing changes on statewide economy (without OKNG). This amount woud increase to $ biion with the support of OKNG in the economy, which equas to rea disposabe persona income impact of $ miion miion $Average Annua Impact of OKNG in Rea Disposabe Persona Income As seen from the graph, the REMI mode projects rea disposabe persona income woud tota $ biion in 2018 for the state of Okahoma if there were no changes. If the ony change between now and then were the presence of OKNG, then the REMI mode forecasts rea disposabe persona income woud increase to $ biion in the state. This means that OKNG woud have amost a $ miion impact upon the state s rea disposabe persona income in Over the five-year time frame, the average impact of OKNG on rea disposabe persona income woud tota $ miion, transating to an average increase of 5.1 percent annuay. Rea Disposabe Persona Income Impact Forecast (miions of current $) $ $ $ $ $ $200 Economic Impact of Rea Disposabe Persona Income (Biions of Current $) $150 $100 Without OKNG With OKNG $50 $ Economic Impact of Okahoma Nationa Guard upon Oahoma 15

16 3. State Output Impact Economic Impact Forecast Time Frame: State output is a broader measure of economic activities associated with a intermediate goods and services produced and vaue-added (compensation and profit) within a geographic area. Aternatey, state output is the sum of gross state product and a intermediate goods and services. State output is affected by consumption, Internationa export, investment, state and oca government spending, intermediate inputs and share of domestic market, and variabes affecting state output incude Commodity Access Index, change in oca suppy, empoyment and intermediate inputs. As noted in the graph, the contro forecast (without OKNG) projects state output to be $ biion in 2014, and this amount woud increase to $ biion with the existence of OKNG in the statewide economy. The 2014 economic impact that OKNG woud have upon state output woud equa $2.411 DIRECT INDIRECT INDUCED $2.535 biion Average Annua Gross State Product Impact of Okahoma Nationa Guard in Okahoma biion in the state. By 2018, the economic impact of OKNG upon Okahoma s GSP woud reach $2.649 biion, suggesting a 9.9 percent increase on state output impact since 2014 and this woud raise state output from the baseine to $ biion. Over the five-year time frame, tota state output impact woud ramp up to $ biion. Average impact of OKNG on state output woud tota $2.535 biion, denoting an average increase at a rate of 2.4 percent. State Output Impact Forecast (biions of current $) $2.411 $2.477 $2.538 $2.602 $2.649 Economic Impact of State Ouput $400 $350 (Biions of Current $) $300 $250 $200 $150 Without OKNG With OKNG $100 $50 $ Economic Impact of Okahoma Nationa Guard upon Okahoma

17 4. Empoyment Impact Economic Impact Forecast Time Frame: Empoyment incudes the number of fu-time and part-time jobs. The tota empoyment impact represents the direct, indirect and induced impacts resuted by the Okahoma Nationa Guard (OKNG). Direct empoyment impact mirrors those jobs created by OKNG. Indirect empoyment impact invoves jobs created to support the function of OKNG, and induced empoyment impact is concerned with jobs created that support spending from empoyees directy and indirecty supported by the OKNG. OKNG has an empoyment mutipier of 2.27 on Okahoma s economy. This means, with every 100 jobs added by OKNG, statewide empoyment woud increase by an additiona 227 jobs. The cacuation of the empoyment mutipier is derived by taking the number of estimated average empoyment impact (13,557 jobs) divided by the number of OKNG s direct fu-time equivaent empoyment input (5,985 jobs). Empoyment Impact Forecast ,602 jobs ,660 jobs ,596 jobs ,568 jobs ,358 jobs OKNG s empoyment impact is projected to add 13,602 jobs onto the statewide economy, from the initia 2,219,249 jobs to 2,232,851 jobs in The estimated economic impact of OKNG on empoyment woud tota 13,357 jobs by The average empoyment impact is projected to account for 13,557 jobs over the five-year time span. With this figure, government empoyment stands a arger share, accounting for 7,708 jobs (57 percent), and private non-farm empoyment woud account for 5,849 jobs (43 percent). 1 Direct SUPPORTS 2 Job at east Additiona Jobs 2500 OKNG has an Empoyment Mutipier of 2.27 on statewide economy Economic Impact of Empoyment 2000 (Thousands of Peope) Without OKNG With OKNG Economic Impact of Okahoma Nationa Guard upon Okahoma 17

18 5. Capita Stock Impact Economic Impact Forecast Time Frame: Capita stock is divided in two categories. These incude residentia capita stock and nonresidentia capita stock. Each capita stock is further disaggregated into actua capita stock and optima capita stock. It is important to note that a reported actua capita stocks are cumuative impact that woud occur in the state. With the existence of OKNG, Okahoma tota capita stock is forecasted to reach biion from the baseine of $ biion and woud eventuay grow to $ biion from $ biion, in 2014 and in 2018 respectivey. Tota capita stock impact woud grow as much as $ miion in 2014 and woud escaate to $ miion by The average impact of tota capita stock woud account for $ miion per year. Residentia actua capita stock is the amount of residentia capita (housing structures) in the region accumuated over time, net of depreciation. The economic impact of OKNG on residentia actua Capita Stock Impact Forecast (miions of current $) 2014 $ $ $ $ $ capita stock is projected to accumuate $ miion and $ miion respectivey, in 2014 and The average impact spiover on the statewide economy woud equate $ miion. Non-residentia actua capita stock is the amount of non-residentia capita (non-housing structures) in the region accumuated over time, net of depreciation. In 2014, the Okahoma s non-residentia actua capita stock impact woud increase $ miion and woud grow to $ miion by 2018, accounting for an average impact of $ miion annuay. Average Residentia Actua Capita Stock Average Non-Residentia Actua Capita Stock $ $ miion $ $ miion $300 $250 Economic Impact of Capita Stock Without OKNG With OKNG (Biions of Current $) $200 $150 $100 Without OKNG With OKNG $50 $ Economic Impact of Okahoma Nationa Guard upon Okahoma

19 6. Popuation Impact Economic Impact Forecast Time Frame: Popuation mirrors the mid-year estimates of peope, incuding births, specia popuations, and survivors from the previous year, economic migrants, internationa migrants, and retired migrants. Popuation affects consumption, state and oca government spending and the reative housing or and prices, so any changes in popuation wi resut in a change on these variabes. Popuation itsef is argey affected by migration. Economic migrants are migrants under age 65 (who were part of the civiian popuation the preceding year) who respond to economic and amenity factors. Increased amenities woud attract more economic migrants into an area. The economic migrant reported here is noncumuative impact, and it woud eventuay taper off over time as the stimuus (OKNG) reaches the end of the forecast time frame. Popuation impact of OKNG is estimated to be 6,367 peope in With this figure, Okahoma s net economic migrant impact is predicted to be 1,395 peope, accounting for 22.2 percent of the tota popuation impact. By 2018, popuation impact woud grow to an estimate of 10,161 peope. Of this Popuation Impact Forecast ,367 peope ,534 peope ,542 peope ,423 peope ,161 peope number, 537 peope woud be economic migrants. If nothing changes in the economy, tota popuation is estimated to be 3,962,703 peope by However, with OKNG s presence to stimuate the economy, this amount woud ro to 3,972,865 peope of the same year. Over the five year time span, average popuation impact of OKNG is projected to increase 8,406 peope per year in the state. Of these, the White popuation comprises the argest share, with 5,644 peope; foowed by 1,081 peope cassified as Other; 1,020 peope in the Back popuation; and 661 peope in the Hispanic popuation. Average Popuation by Race 4000 Economic Impact of Popuation 1,020 (12.1%) Back- NonHispanic 1,081 (12.9%) Other- NonHispanic 661 (7.9%) Hispanic ,644 (67.1%) White - NonHispanic (Thousands of Peope) Without OKNG With OKNG Economic Impact of Okahoma Nationa Guard upon Oahoma 19

20 7. Proprietors Income Impact (with inventory and capita adjustment) Economic Impact Forecast Time Frame: Proprietors Income with inventory and capita consumption adjustment is the current production income of soe proprietorships, partnership, and tax-exempt cooperatives. Corporate directors fees are incuded in proprietors income. Proprietors income excudes any dividends and monetary interest received by non-financia business and renta incomes received by persons not primariy engaged in the rea estate businesses; these incomes incude dividends, net interest, and renta income of persons, respectivey. As can be seen in the graph beow, if nothing changes in the Okahoma s economy, proprietors income is predicted to be $17, miion in This figure is projected to escaate to $17, miion if OKNG s impact was incuded in the state, suggesting an increase of $ miion in terms of proprietors income impact. DIRECT INDIRECT INDUCED $ miion Average Proprietor s Income Impact By the end of 2018, the economic impact of OKNG on proprietors income is estimated to add an additiona $ miion onto the initia baseine projection of $19, miion. Over the forecast time period, the average impact on proprietors income woud grow by $ miion per year. Proprietors Income Impact Forecast (miions of current $) $ $ $ $ $ Economic Impact of Proprietors Income $20 (Biions of Current $) $15 $10 Without OKNG With OKNG $5 $ Economic Impact of Okahoma Nationa Guard upon Okahoma

21 8. Tax Impact Economic Impact Forecast Time Frame: $ TAX $ miion OKNG s Average Annua Income Tax Impact Income tax is derived from persona income. 4 The income tax impact reported in this section represents the revenues (through the spiover effects from OKNG s empoyment) received by the state of Okahoma. Income tax revenue comprises of direct, indirect and induced impacts of OKNG. State empoyees who work during the work week and federa technicians, both dua and non-dua status, who work at OKNG during the work week, pay state and federa income tax. AGRs and driing guardsmen, either traditiona guardsmen or dua status federa technicians, are subject to federa income tax but not state income tax. The direct impact reported here represents ony the state income tax revenue coection that occurs through some of the direct empoyment of OKNG, which incudes state empoyees and federa technicians. The economic impact that woud occur due to the presence of OKNG woud be $ miion in 2014 and woud eventuay rise to $ miion in 2018 upon Okahoma s income tax revenue. Over the forecast time period, OKNG s average economic impact on state income tax revenue woud equa $ miion per year. Income Tax Impact Forecast (miions of current $) $ $ $ $ $ Saes Tax Impact Forecast (miions of current $) $6.603 $7.007 $7.407 $7.789 $8.072 Saes tax is tax coected by the government on the saes of certain goods and services. The saes tax impact reported here incudes tax revenue coection for the state of Okahoma. The state of Okahoma evied a 4.5 percent state tax rate on certain saes. The cacuation of saes tax impact uses the same percentage of saes tax rate mutipied by consumption impact (on taxabe goods and services) projected by the REMI mode. Even though OKNG is not iabe to pay saes tax on expenditure, the state saes tax revenue coection reported here represents the spiover effect from the direct empoyment, indirect and induced impacts resuted by OKNG. The predicted saes tax revenue impact stimuated by OKNG woud top $6.603 miion in Over the years of the forecast time frame, this amount is projected to spira upward to $8.072 miion by Okahoma s saes tax impact is estimated to increase $7.376 miion per year on average, accounting for an average yeary increase of 5.2 percent. $ TAX $7.376 miion OKNG s Average Annua Saes Tax Impact Economic Impact of Okahoma Nationa Guard upon Oahoma 21

22 Concusion Based on the findings, the possibe economic impact generated by the OKNG on statewide economy is significant. The foowing presents a snapshot of possibe economic impact of OKNG upon Okahoma in 2018: State Output Impact woud account for $2.649 biion Gross State Product Impact woud account for$1.343 biion Rea Disposabe Persona Income Impact woud account for $ miion Empoyment Impact woud account for 13,358 jobs 22 Economic Impact of Okahoma Nationa Guard upon Okahoma

23 Reference 1. George Treyz, Regiona Economic Modeing, Kuwer Academic Pubishers, Office of Management & Budget 3. Resource System Group, Inc. 4. The Okahoma Tax Commission ( reports $3,307,349,252 of income tax was coected in The Bureau of Economic Anaysis ( reports persona income in Okahoma equaed $154,958,271,000 in The proportion of income tax coected to persona income equas 2.13 percent The cacuation for Okahoma tax revenue appies to the same proportion (income tax coected/ persona income = 2.13 percent) to the persona income figure reported by the REMI mode. This project was assisted by the student interns: Diane Fitzsimmons, Eric Luthi, Kaya Misak Economic Impact of Okahoma Nationa Guard upon Oahoma 23

24 Okahoma Nationa Guard n e Center r n ne e e ent N W E S Southwestern Okahoma State University n s Center for Economic & Business Deveopment 100 Campus Drive Weatherford, OK Phone (580) Fax (580) cebd@swosu.edu Southwestern Okahoma State University s Center for Economic & Business Deveopment