Any responsible Downtowner knows that buying locally — whether it’s groceries, a night on the town or a new outfit — is important to the vitality of our urban core. Now we have the facts to prove it.

A recent study commissioned by Local First Arizona found that SCF Arizona, the state’s largest workers’ compensation insurer, had a $528.3-million economic impact in Arizona in 2009. Applied Economics, who conducted the study, determined that last year SCF sourced 82% of its goods and services from other Arizona companies.

According to Kimber Lanning, Executive Director of Local First, the purpose of the study was to show the impact that one major employer can have on Arizona’s economy. In the past, other general measurements have suggested that when consumers buy locally the majority of those dollars spent are recirculated back into the local economy. This is the first fully scientific study in Arizona measuring the economic impact of just one employer.

SCF Arizona is a sleeping giant when it comes to its local economic impact in the state. We hope this study encourages business leaders to think even more broadly about the impact of spending their money with local companies. The ripple effect adds up to much more than most of us realize, and this study quantifies that impact. The numbers are staggering.

— Local First Arizona Executive Director Kimber Lanning

Rick DeGraw, Chief of Staff of SCF Arizona, said the 531-employee company has looked for more ways to buy locally over the past few years. SCF Arizona spent $38.5 million with other Arizona companies in 2009. In turn, this created an estimated $68.2-million impact, including the dollars recirculating within the state.

In addition, SCF Arizona pays its employees $36.4 million, or an average of $59,100 per employee plus benefits. This is well above the all-industry average wage across the state. Factoring in employees at all the secondary businesses SCF Arizona purchased from, total employee impact from SCF Arizona was another 3,000 jobs and $167.9 million in annual payroll. These jobs and payroll stem from direct and indirect impacts of supplier demand created by SCF and consumer demand created by its employees.

SCF Arizona also plays an important role as a responsible corporate citizen in Arizona, donating a staggering $570,000 to nonprofit entities across the state in 2009, despite the massive economic downturn.

We feel strongly about being an Arizona company. Our policyholders are all Arizona companies, and when we support them, we are really supporting ourselves. That’s true of any business when a consumer spends his or her dollars locally. So, whenever we can, we spend locally.

— SCF Arizona President and CEO Don Smith

Just this month, SCF Arizona stopped buying office supplies from Minneapolis-based Corporate Express and switched to Tempe-based Wist Office Products Co., a workers’ compensation policyholder. “We compared 1,000 products, and were able to move over to Wist without paying more for anything,” DeGraw said.

Created in 1925 as a part of the Industrial Commission of Arizona, SCF Arizona employs 555 people, covers more than 35,000 businesses and has about a 40% market share in the state. In May 2010, Gov. Jan Brewer signed Senate Bill 1045, directing SCF to become a mutual insurance company. Under the law, the organization will have three years to transition, becoming fully privatized in January 2013. When the transition is complete, SCF Arizona will be the largest insurance company in Arizona — and will continue to have a major impact on the local economy.

Kimber Lanning

It is hoped that this study reignites interest in local purchasing by both private and public sector organizations in Arizona. Lanning has tried to convince the state of Arizona to switch its $5-million office supply contract with OfficeMax to Wist. In 2007, Local First Arizona organized a study that showed the state’s $5-million office supply contract was losing $500,000 in “leakage” by staying with OfficeMax and not switching to a local supplier. State legislation addressing that issue was unsuccessful in 2008.

The state of Arizona is one of only three remaining states that does not favor local businesses in the purchasing process. Arizona’s purchasing decisions are based on the lowest price rather than actual net gains for the state. We can prove if we spend a bit more money supporting a company that provides Arizona jobs, the impacts are positive.

— Kimber Lanning

For the complete study produced by Applied Economics, contact Kimber Lanning, Executive Director of Local First Arizona, or find it on the LFA website and on their Facebook page.