Matt Gentry | The Roanoke Times

Radford University's Muse Hall can be seen from Main Street in downtown Radford. While Virginia Tech and Radford University are susceptible to state budget shortfalls, neither institution is likely to close because of financial problems — unlike private companies whose cutbacks or closures can devastate local economies, said Blacksburg Finance Director Susan Kaiser.

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Insulated, but not immune.

That's the consensus of business leaders and officials about the economies of the New River Valley's largest college towns amid a national recession.

While Virginia Tech and Radford University are susceptible to state budget shortfalls, neither institution is likely to close because of financial problems -- unlike private companies whose cutbacks or closures can devastate local economies, said Blacksburg Finance Director Susan Kaiser.

Charles Vehorn, assistant professor of economics at Radford University, said his employer can help soften the blow of a recession. "Traditionally, government sector work has not been cut back when recessions come," Vehorn said.

Radford University's 1,231 jobs provide relatively steady work at relatively high wages, and the university's 9,122 students provide a fairly steady stream of customers for local business, Vehorn said.

The same is true of Tech's 9,827 full-time employees and 27,572 students.

In 2002, Ernest Wade, an instructor in Radford's economics department, conducted a study of that university's impact on the city that shares its name. He said there's no doubt the university is an economic catalyst. Relatively insulated from business cycles, the university provides high-quality jobs without generating the pollution problems of smoke stack industries, he said.

Radford University does research and job training aimed at private industry, and it works with local government, Wade said, so the university's support of the local economy is greater than the direct effects of providing jobs and consumers.

Recessions aren't the traumatic things they used to be, Vehorn said, because the Federal Reserve has gotten better at counteracting them. The recent drop in interest rates was larger and happened earlier in the cycle than it would have a generation ago, he said.

"The fact that we've had two recessions in 20 years and they were both mild signifies something," Vehorn said.

No one has figured out how to completely defeat the business cycles, he said, but central bankers have learned to lessen the blow.

To some extent, that helps the small, locally owned businesses that grow up around the universities.

"I don't want to say that Radford's in a little bubble, but we are insulated a little bit," said Becky Haupt, executive director of Main Street Radford.

Haupt said the university offers an economic cushion, and downtown businesses will diversify their offerings and reach out to the university's pool of customers.

"People are just very proactively promoting themselves," she said.

In Blacksburg, it's a mixed bag for smaller retailers, however. Commercial areas such as University Mall, which was recently expanded, are doing well. But it's a different situation in the town's core.

University Mall developer Bill Ellenbogen said recently that the number of business vacancies downtown is more than he's seen in his three-plus decades living and working here.

Downtown Merchants of Blacksburg, the Friends of the Blacksburg Farmers Market and town officials have been working for some time on ways to revitalize the town's core. The latest plan is to encourage the growth of the area as an arts and culture center. Progress has been slow, however.

Public economies

Despite a recession, in 2008 Tech and Radford may benefit from an expected rise in student enrollment at universities across the Southeast, according to a recent article in the Chronicle of Higher Education. Off-setting that, though, may be declining returns on university investments and rising energy costs. Still, the economic forecast for most universities is stable, the article said.

If the country plunges into a long-term downturn, however, Blacksburg will eventually experience a trickle-down effect, despite the cushion provided by Tech, Kaiser said. So will the town government's finances.

Good management is key to weathering the worst, and that includes careful monitoring of vulnerable funding sources, Town Manager Marc Verniel said.

Over the past decade or so, Blacksburg has worked to diversify its funding streams, providing another cushion for its $47 million budget. No single source, whether state appropriation or local tax, dominates revenues. If a recession goes on long enough, however, the town may have to look at cutting some expenses to balance its budget.

Right now, "we just have to work to make sure our projections are realistic," Verniel said.

Some budget hiccups may come soon. This year the town council is for the first time in more than a decade considering increasing the number of police officers on its force. But state lawmakers have already warned localities to expect a 5 percent cut in state funding for law enforcement.