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Iowa State vet diagnostic lab provides 8:1 return on investment

Study shows Iowa State Veterinary Diagnostic Lab delivers robust return on investment for taxpayers in state and sense of stability for animal agriculture industry.

A study by Iowa State University researchers — published recently in the peer-reviewed journal Preventive Veterinary Medicine — found that the Iowa State Veterinary Diagnostic Laboratory (VDL) delivers a robust return on investment for Iowa's taxpayers and a sense of stability for the animal agriculture industry, even as the laboratory’s facilities have aged over the course of decades.

The study illustrates the extent to which Iowa’s livestock producers and veterinarians rely on Iowa State’s VDL and models how animal agriculture production would decline without the services provided by the laboratory, which accepts samples from a range of animals and conducts advanced diagnostic techniques to lead disease identification and surveillance efforts.

Many of the lab’s facilities are decades old, and the university has designated construction of a new facility a major priority.

The Iowa State University College of Veterinary Medicine commissioned the original economic analysis of the laboratory.

Lee Schulz, an assistant professor of economics and lead author of the paper, said the analysis concluded that the benefits provided by the diagnostic lab outstrip the state tax dollars devoted to it. The paper concludes that the lab’s contributions become even more substantial during animal health emergencies, such as the highly pathogenic avian influenza outbreak in 2015 that affected poultry and egg operations throughout Iowa and in the surrounding areas.

The authors applied an economic technique called input-output modeling to a range of economic and tax data from 2014 to form a snapshot of how much of Iowa’s economy depends on animal production and processing.

Animal production added $13.03 billion to the state’s gross domestic product that year, said Dave Swenson, associate scientist in economics and co-author of the paper. Of that, $6.7 billion was labor income for workers and proprietors. Animal processing added another $4.4 billion to the state’s gross domestic product in 2014, Swenson said.

The researchers then modeled how the absence of the VDL would affect animal agriculture in Iowa -- using a survey of clients who utilize the diagnostic lab’s services frequently as a guide. They found that because the diagnostic lab’s activities contribute to the ability of producers to identify and manage disease as well as transport livestock, the lab’s absence would lead to a 6.64% drop in the economic output of animal agriculture in Iowa during a normal year. That drop jumps to 25.92% during a year with an animal health emergency, according to the study.

The state appropriates roughly $4 million per year to help cover the diagnostic lab’s operation. The economic analysis found that the lab, through its support of the animal agriculture industry, helps generate $31.79 million in state revenue in normal years and $124.15 million in revenue in years with severe animal health emergencies. That equates to a nearly 8:1 return on investment in a normal year and a 31:1 return on investment in emergency years, Schulz noted.

Schulz said producers rely on the diagnostic lab’s services and expertise when making important management decisions. Without that expertise, production efficiencies and competitive advantages would decline.

“By providing diagnosis, prevention and treatment of disease, as well as ongoing monitoring of health status, there’s more certainty about production in the broader supply chain, and segments of the industry are more likely to make investments they otherwise would not have made,” Schulz said. “The services the VDL provides help to grow animal agriculture, which significantly contributes to the state’s economy.”

The journal article, titled “Economic Impact of University Veterinary Diagnostic Laboratories: A Case Study,” is available online.

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