Thursday, November 18, 2004

Investing in schools
will aid economy,
says expert

Rather than building stadiums or luring companies with tax breaks, states would help their economies more by putting money into early-childhood education, says Art Rolnick, vice president of the Federal Reserve Bank of Minneapolis.

"Early-childhood development is economic development, and with a very high public return if done right," Rolnick said yesterday at a breakfast sponsored by Enterprise Honolulu and the Good Beginnings Alliance. "We have computed a 16 percent real annual rate of return on investment."

That's the kind of return that should attract any venture capitalist, he said, but people are not used to looking at the issue in economic terms. Because the gains are over the long term, they are not as obvious as, for example, a new stadium, but they are more compelling, he contends.

"We spend billions of dollars in an economic development bidding war, with very little return," Rolnick said, noting that efforts to attract businesses tend to move jobs around, not create new ones. "Money for these bidding wars would be much more productively used by educating our work force."

And the best place to invest in education, he said, is in the early years, when critical cognitive and social skills are developed. He cited research including the High/Scope Perry Preschool Study, a scientific experiment that has tracked at-risk children over four decades. It shows kids in the Michigan program were much more likely than their peers to be literate by eighth grade, graduate from high school, get a job, pay taxes -- and were much less likely to commit crimes.

"The crime rate goes down 50 percent," Rolnick said. "It's remarkable the effect this program has."

Other randomized, long-term studies have shown similar results for high-risk children in good programs that had small class sizes and qualified teachers and got parents involved, he said.

As director of research for the Federal Reserve Bank of Minneapolis, Rolnick oversees a department of 30 academics, including a recent Nobel prize winner, that collects and analyzes data to help guide national monetary policy. Since he and his colleague, Rob Grunewald, issued a report last year on the economic returns from early-childhood development, they have visited 35 states to discuss the issue.

"What makes this so interesting is Mr. Rolnick, being a banker, has put numbers to this that business has confidence in," said Mike Fitzgerald, president of Enterprise Honolulu, a privately funded nonprofit group that promotes economic development. "An independent observer is saying this is one of the best investments you can make for your community, not just your economy."

Early-childhood education has been moving up on the local radar screen, with the governor and legislators suggesting that it will be an issue with bipartisan support in the coming legislative session. A poll released in September by the Good Beginnings Alliance found that roughly eight out of 10 Hawaii residents believe the state should provide subsidies to make preschool affordable to all children.

In Minnesota, Rolnick and others have proposed creating a $1.5 billion endowment, funded equally by the state, the private sector and the federal government, to provide "tuition-plus scholarships" to the 20,000 children living at or below the poverty line.

Families would choose from a list of qualified preschool providers, and each family would have a mentor to work on parenting skills, health needs and other issues, Rolnick said. Payment to providers would be partly contingent on showing progress in the cognitive and noncognitive skills needed for school readiness.

"I would like to see Hawaii look at developing this kind of a program for at-risk children," said Rep. Cynthia Thielen (R, Kaneohe-Kailua), who was among 50 legislative, business and community leaders who heard Rolnick's speech. "This should be a bipartisan program where we can really link together to help the at-risk preschoolers."

Federal Reserve Bank of Minneapolis



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