Economic Impacts

SCF Arizona employs a total of 555 people throughout Arizona with a total annual payroll of about $32.8 million (Figure 2). This results in an average wage per employee of $59,100, which is well above the all-industry average wage for Arizona. In addition, SCF Arizona provides a substantial employee benefit package including health, short and long term disability, life insurance, employee assistance programs, retirement benefits, child and elder care resources and a variety of other programs. On average, employee benefits add an additional 47 percent to total employee compensation.

A significant component of SCF Arizona’s impact is local supplier purchases. Approximately 82 percent of total vendor spending is from in-state vendors, which is very high even for a locally based company. This is due in part to the fact that the majority of purchases made by SCF Arizona are services rather than manufactured goods, which are more likely to be available locally. Major local purchases include professional services, advertising, computer maintenance, utilities, and building maintenance (Figure 3).

In 2009, SCF made close to $38.5 million in purchases from local vendors (Figure 4). As purchases are made from local vendors they, in turn, support jobs and payroll in Arizona. There is also additional local spending that may take place on behalf of the local vendors that supports additional jobs and payroll. SCF’s local vendor purchases support an annual economic impact of $68.2 million statewide and support about 620 jobs at local vendors and their suppliers.

In addition to vendor spending, SCF Arizona also had paid $150.1 million in claims to medical providers, creating a significant impact in the local health care industry. These claims payments generate an annual economic impact of $265.8 million in Arizona along with about 2,100 jobs and $128.2 million in payroll or personal income.

SCF Arizona also made local equipment purchases of $770,000 and construction expenditures of $2.9 million for tenant improvements in 2009. This represents a fairly typical level of annual capital expenditures. The $3.7 million in capital equipment and construction created an economic impact of $6.3 million in Arizona along with 43 jobs and $2.3 million in personal income.

It is important to note that locally owned companies are generally more likely to procure products and services from other local vendors. This is particularly true for procurement of professional services, such as accounting, legal, advertising and other business support services. The high share of SCF purchases from local vendors results in a much higher indirect economic impact than would occur from a national insurance carrier with local employees but limited local procurement.

The composite operations impact results presented here are broken down in terms of direct impacts, indirect impacts (vendor purchases, capital expenditures and claims payments), induced impacts (employee spending) and total impacts. All total, the operations of SCF Arizona create a total economic impact of $528.3 million in Arizona’s economy each year, directly and indirectly supporting about 3,600 jobs and $204.5 million in annual personal income (Figures 6 and 7).

Direct impacts include the direct value of services provided by SCF Arizona. Direct output is a proxy for the value of these services. Direct jobs represent employees at SCF offices. Total jobs include local supplier businesses where SCF Arizona makes purchases, medical providers that receive claims payments, and local establishments where employees spend their income. These supported local businesses and their employees in turn make additional local purchases that are captured in the total impact estimates. The total impact includes both the direct impacts and the secondary impacts created by other local businesses and their employees.

The secondary, or indirect and induced, impacts presented here are called multiplier effects. Multiplier effects are a way of representing the larger economic effects on the local economy. Multiplier effects translate an increase in output (loosely defined as sales, less profits) into a corresponding increase in jobs and personal income. In essence, the multiplier effect represents the recycling of local spending. This recycling process creates new business opportunities.

The multipliers used in this analysis are from IMPLAN, a national vendor of economic impact software, and are specific to Arizona. Industry specific multipliers were used for each category of vendor purchases and household consumption multipliers were used to model employee spending. On average, the output multiplier for SCF Arizona operations is 1.8, excluding claims payments to medical providers. This means that for every $1 million of output or value of services provided by SCF Arizona, an additional $800,000 in economic activity is generated in the state’s economy. When claims payments to medical providers are included, the overall multiplier increases to 3.7, meaning that for every $1 million of direct output by SCF, an additional $2.7 million of economic activity is generated in Arizona along with 25 jobs and $1.4 million of payroll.