The University of Hawai'i's 10-campus system contributes more than $1.66 billion to the state's economy, according to a recent study completed by a UH economist.

The UH economic impact study looks at Hawai'i's economy in 2006 and finds that the university represented 2.85 percent of the gross state product. That's more than the arts and entertainment industry, agriculture, manufacturing and even information science.

The last time the university completed this study was in 2003.

"This study says, well, the university is one of the important components of economic activity," said David Hammes, a UH-Hilo economics professor and lead investigator on the project. "But more than that, in an interconnected sense, the university is in the service of educating people and helping them lead a better, more productive life."

The study found that for every dollar of state funding, the university was able to increase that by an additional $1.88 of education-related expenditures in the economy.

Similarly, for every dollar of state funding, UH was able to generate $4.25 in business sales and $2.59 in labor earnings, the report said.

According to the study, university expenditures generated $148 million in state tax revenue in 2006 — or 3.3 percent of total state taxes.

Also, UH spending resulted in $2.44 billion in business sales and 37,316 jobs.

Linda Johnsrud, UH vice president for academic planning and policy, said the study shows there is "no greater investment than education." She said the study confirms that UH continues to provide a return on the state's investment into education.

"This study was one way of quantifying that. By conducting a study like this, we can actually make it concrete," Johnsrud said.

While the study looks at the short-term effects of the state's contribution to higher education, UH officials say the story is really in the more long-term effects upon the state's economy.

For instance, Hammes pointed out that a Hawai'i resident with a bachelor's degree pays $168,450 more in state taxes over a lifetime as opposed to someone with a high school diploma.

In 2006, the university had a base of $575 million in funding from the Legislature and in addition had $574 million in spending generated by research and training grants, revolving funds and special funds. On top of that, UH contributed $506 million in spending brought in by students through tuition, fees or other spending.

Over the years, UH's contribution to the state's economy has been steadily increasing, according to the study.

In 1999, UH contributed more than $1 billion to the state's economy. And in 2003 the university, was a $1.4 billion player in the Islands.

The rise can be attributed to an increase in state spending in higher education — $575 million in 2006 compared to $454 million in 2003. Also, Johnsrud said, government research and training grants have also been on the rise. In 2005-2006, research and training grants systemwide reached their highest point ever at $433 million, she said.

The study shows that the state is getting a good return on its investment in the university, Hammes said.

"In a sense, the university is not a black hole where the money goes in and doesn't come back out," he said.

Reach Loren Moreno at lmoreno@honoluluadvertiser.com.