economic development and early childhood education

1© Copyright 2006, NorthStar Economics, Inc. All rights reserved.

10/13/06

ECONOMIC DEVELOPMENT

AND EARLY

CHILDHOOD EDUCATION

Economic Development and Early Childhood Education

Law and Policy of Universal Preschool

Loyola University

of Chicago Law School

ECONOMIC DEVELOPMENTAND

EARLY CHILDHOOD EDUCATION

Dennis K. WintersVice President &

Director of Research

October 13, 2006

Law and Policy of

Universal Preschool


10/13/06


AND EARLY

CHILDHOOD EDUCATION



Loyola University


Show you the fiscal benefits for K-12

Tell you how to sell this to local constituents

Show you how the economy is changing

Tell you why early education is important

WHAT I WILL DO TODAYSHOW & TELL


10/13/06


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CHILDHOOD EDUCATION



Loyola University


THE EVIDENCE IS INHUGE RETURNS

• Perry Scope

• 17 : 1

• Chicago-Child Parent• $7 to $1 total

• $4 to $1 public

• Abecedarian Educational Child Care• $4 to $1 total

• Elmira Prenatal/Early Infancy Project• $5 to $1 total

• $4 to $1 public


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Loyola University


BENEFITS ARE SHAREDACROSS SECTORS

Personal Success – 20% of gains• Higher Income

• Better Employment Attributes

• Better Health

Public Externalities – 80% of gains• Lower Crime

• Less Social Intervention

• Greater civil contributions

Business• More Skilled Workforce

• Higher Productivity

• Less Turnover


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CHILDHOOD EDUCATION



Loyola University


WISCONSIN STUDYFISCAL FLOWS IN K-12

• TitleThe Economic Returns to Wisconsin’s Education System from Investment in Four-year-old Kindergarten

• SponsorsTrust for Early EducationThe Pew Charitable TrustsPre-K Now

• AuthorsProfessor Clive R. BelfieldQueens College, CUNY

Dennis K. WintersNorthStar Economics, Inc.


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CHILDHOOD EDUCATION



Loyola University


SCOPE OF WISCONSIN STUDYFISCAL BENEFITS/COSTS

• Wisconsin 2002-03 data

• Benefits Limited to K-12 Fiscal Flows

• State & Milwaukee PS Analysis

Parameters:


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CHILDHOOD EDUCATION



Loyola University


WISCONSIN STUDYASSUMPTIONS

• Quality Programs• Trained Staff – BS, Early Ed Certified• Family Outreach – Home Visits @ 1 per 2 wks

• Universal Offering • Attracts 32,102 more students• Brings total to 48,153• Leaves 29% uncovered, 25,861


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CHILDHOOD EDUCATION



Loyola University


PROVISION OF PRE-KINDERGARTENCOHORT OF 4-YEAR OLDS

Note: * Head Start programs are also available for 3-year olds. This table does not include demographic information on child care provision across the state. Sources: Census (2000); Wisconsin Department of Public Instruction; NIEER Yearbook (2003).

Provision Types for 4-year Olds in Wisconsin

Current Provision*

UniversallyAvailable 4K

Children aged 4 89,170 89,170

Public Early Childhood Special Education

6,240 (7%) 6,240 (7%)

Federal Head Start 8,026 (9%) 8,026 (9%)

Wisconsin Head Start 890 (1%) 890 (1%)

4K 16,051 (18%) 48,153 (54%)

No public provision 57,693 (65%) 25,861 (29%)


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CHILDHOOD EDUCATION



Loyola University


WISCONSIN STUDYFISCAL COSTS & BENEFITS

• Costs • Quality Staff• Support Services

• Benefits• Reduced Special Education• Reduced Grade Repetition• Better Teaching Environment

• Higher Job Satisfaction• Lower Turnover• Less Need for Substitutes

• Improved School Environment• Reduced Support Programs


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CHILDHOOD EDUCATION



Loyola University


WISCONSIN STUDYFISCAL COSTS

• Costs • Quality Staff• Support Services

Costing Formulas(32,102 new pupils statewide, 3,209 for Milwaukee)

Unit Annual

Cost Per Child

Total ExtraWisconsinInvestment($ million)

Milwaukee District

Investment($ million)

Actual $3,518 $112.93 $11.29

Guaranteed high quality 4,468 143.43 14.34

Comparable to Head Start 6,445 206.90 20.69

Notes: ‘Actual’ refers to current 2003 expenditures on 4K. ‘Guaranteed high quality’ requires 27% more resources than are needed for ‘Actual’. ‘Comparable to Head Start’ assumes that 4K providers will receive funds equivalent to Head Start funding.Sources: NIEER Yearbook (2003); Marshall et al. (2004); and Head Start data.


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CHILDHOOD EDUCATION



Loyola University


WISCONSIN STUDYFISCAL BENEFITS

• Benefits• Reduced Special Education• Reduced Grade Repetition


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CHILDHOOD EDUCATION



Loyola University


WISCONSIN STUDYSCHOOL SYSTEM FISCAL BENEFITS

BENEFITSReduced Special EducationReduced Grade Repetition Current

Provision

Cohort Entering Kindergarten in 2005

with Universally Available 4K

Results

Students Per Category (%):

Regular education (non-repeater) 83.3 84.1

Special education 14.4 13.8

Repeats 1 grade 2.3 2.1

Costs Per Category:

Regular education (non-repeater) $ 94,733 $ 94,733

Special education $ 181,513 $ 181,513

Repeats 1 grade $ 101,775 $ 101,775

PV K–12 Expenditures ($ million) $ 8,431 $ 8,387

PV Cost-Savings ($ million):

Reduction in special education $ 42.41

Reduction in grade repetition $ 0.95

Notes: Present Value (PV) figures are discounted over the child’s educational span from K–12 at a discount rate of 3.5%. Economic values are in 2004 dollars.


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CHILDHOOD EDUCATION



Loyola University


WISCONSIN STUDYFISCAL BENEFITS (continued)

• Benefits•Better Teaching Environment

• Higher Job Satisfaction• Lower Turnover• Less Need for Substitutes

• Improved School Environment• Reduced Support Programs


10/13/06


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CHILDHOOD EDUCATION



Loyola University


WISCONSIN STUDYFISCAL BENEFITS (continued)

BENEFITSLearning Productivity Increases($ million)

Cohort Entering Kindergarten in 2005 with Universally Available 4K

Results

Teacher-related:

Higher job satisfaction $51.33

Lower teacher turnover $18.48

Reduced need for substitute teachers $5.48

School-related:

Improved school safety and climate $14.87

System-related:

Reduced pressure for aid programs $7.44

Notes: Present Value figures are discounted over the child’s educational span from K–12 at a discount rate of 3.5%. Economic values are in 2004 dollars.


10/13/06


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CHILDHOOD EDUCATION



Loyola University



BENEFIT/COST ANALYSISPresent Value Figures($ million)


Investment (COST) $206.90

School System Benefits:

Special education placement $42.41

Grade retention $0.95

Job satisfaction for teachers $51.33

Retention of teachers $18.48

Reliance on substitute teachers $5.48

Spending on school safety $14.87

Pressure on school support $7.44

Total Educational Benefits (BEN) $140.96

Net Fiscal Impact (BEN-COST) -$65.94

Benefit–Cost Ratio (BEN/COST %) 68%


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Loyola University


MILWAUKEE STUDYFISCAL BENEFITS

Notes: Present Value (PV) figures are discounted over the child’s educational span from K–12 at a discount rate of 3.5%. Economic values are in 2004 dollars.

Cost-Savings for Educational Budgets for Milwaukee from Expanded 4K Programs ($ million)


Results

Placement-related:

Lower special education $5.30

Lower grade retention $0.44

Teacher-related:

Higher job satisfaction $5.16

Lower teacher turnover $1.86

Reduced need for substitute teachers $0.55

School-related:

Improved school safety and climate $1.66

System-related:

Reduced pressure for support programs $0.83


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CHILDHOOD EDUCATION



Loyola University


MILWAUKEE STUDYFISCAL COSTS & BENEFITS

MILWAUKEE BENEFIT/COST ANALYSISPresent Value Figures($ million)


Investment Cost (COST) $20.69

Total Educational Benefits (BEN) $15.80

Net Fiscal Impact (BEN-COST) -$4.89

Benefit–Cost Ratio (BEN/COST %) 76%

Notes: Present Value figures are discounted over the child’s educational span from K–12 at a discount rate of 3.5%. Economic values are in 2004 dollars.


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CHILDHOOD EDUCATION



Loyola University



• Costs • $207 million

• Benefits• $141 million

• Net Cost • $66 million• Returns 68 cents on the dollar• Returns 76 cents on the dollar for Milw


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CHILDHOOD EDUCATION



Loyola University


FISCAL COSTS & BENEFITSPERSPECTIVE

• $66 million < 1% of State Education Budget

• Huge Returns to Individual and Society

• Imperative to Workforce Development

• Imperative to Economic Development


10/13/06


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CHILDHOOD EDUCATION



Loyola University


WISCONSIN STUDYEXPANDED COSTS & BENEFITS

BENEFIT/COST ANALYSISPresent Value Figures($ million)


Results

Investment (COST) $206.90

Total School System Savings (BEN) $140.96

OTHER BENEFITS

Tax Revenue Gains 48.44

Criminal Justice System 142.18

Health Expenditures Savings 7.00

Total Other Benefits $197.62

Grand Total Benefits $338.58

Net Fiscal Impact (BEN-COST) $131.68

Benefit–Cost Ratio (BEN/COST %) 1.64


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CHILDHOOD EDUCATION



Loyola University


HOW DO YOUSELL

EARLY EDUCATIONTO

YOURCONSTITUENCIES?

PUBLIC BUSINESS

LEGISLATURE


10/13/06


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CHILDHOOD EDUCATION



Loyola University


EVOLUTION OF ECONOMIC PROSPERITY

• 19th Century – Bigger and Better Farms

• 20th Century – Bigger and Better Factories

• 21st Century – Bigger and Better Ideas


10/13/06


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CHILDHOOD EDUCATION



Loyola University


U.S. SECTOR EMPLOYMENT TRENDS

0

20

40

60

80

100

1900 1950 2000

(% SHARE)

Other (Retail, Construction, Government, etc.)

Private Services

Manufacturing

Agriculture

YEAR


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CHILDHOOD EDUCATION



Loyola University


Old Economy

• Raw Materials

• Cost Race to Bottom

• Workers Chased Jobs

• Quality of Life was luck of the draw

New Economy

• QoL attracts talent

• Businesses Chase Talent

• Value-Added Products

• Brain Power

NEW ECONOMYCHANGED CONSTRUCT


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Loyola University


DESIGNED HEREMANUFACTURED THERE

Designed in California

Assembled in China


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Loyola University


KATHLEEN


10/13/06


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Loyola University


Workforce development and

economic development are

interrelated and interdependent.

Ed = ED


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CHILDHOOD EDUCATION



Loyola University


NEW ECONOMYTALENT BASED

Carly Forina, former CEO HP –

Don’t show me your highway interchange or TIF district, show me the number of college graduates


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Loyola University


"The days are over when you could walk into a paper mill with a high school diploma and run one of the machines."

– Patrick Schillinger, Wisconsin Paper Council President,

Center will teach paper-industry technology, Milwaukee Journal Sentinel, JS Online, October 21, 2004.

NEW ECONOMY HIGHER SKILL SET REQUIRED


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CHILDHOOD EDUCATION



Loyola University


“Today in most fields I know, the struggle is about creativity and innovation. There is no script.”

– Robert B. Shapiro, former CEO & Chairman, Monsanto Corporation

NEW ECONOMY NEED FOR CREATIVITY & INNOVATION


10/13/06


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CHILDHOOD EDUCATION



Loyola University

of Chicago Law School Source: Autor, Levy and Murnane, 2003.

Nonroutine manual

Routine cognitive

Routine manual

Nonroutine analytic.

Nonroutine interactive

WORKPLACE REQUIREMENTSCHANGES IN SKILLS USED AT WORK*

Source: K-12 Education and Economic Summit presentation by Alan B. Krueger, Princeton University

* Based on the Dictionary of Occupational Titles


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CHILDHOOD EDUCATION



Loyola University


NEW ECONOMYSCARCITY OF SKILLED WORKERS

Former Federal Reserve Chairman Alan Greenspan voiced his concern about a growing earnings gap between highly skilled and unskilled workers.

"It's a problem caused basically by our skill mix not keeping up with the technology that our capital stock requires," the Republican Fed chairman said. . . .


10/13/06


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CHILDHOOD EDUCATION



Loyola University


THE NEW ECONOMIC EQUATIONIN A KNOWLEDGE-BASED ECONOMY

BRAINPOWER

EARNINGPOWER=


10/13/06


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CHILDHOOD EDUCATION



Loyola University


Source: K-12 Education and Economic Summit presentation by Alan B. Krueger, Princeton University


10/13/06


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CHILDHOOD EDUCATION



Loyola University


THE EARNINGS GAP HAS WIDENEDREAL $ TERMS

Source: US Census Bureau; Postsecondary Education Opportunity

Education.

Income(2004 Dollars)

Difference (High School vs.

Other Degree)

1975 2004 1975 2004

High School $27,538 $28,631n/a n/a

Some College

/ Asso. Degree$29,452 $32,010 $1,914 $3,379

Bachelors $43,298 $51,568 $15,760 $22,937

Advanced $58,721 $78,225 $31,183 $49,594


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CHILDHOOD EDUCATION



Loyola University


MEDIAN FAMILY INCOME BY EDUCATIONAL ATTAINMENT

Source: U.S. Census Bureau


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CHILDHOOD EDUCATION



Loyola University


TAXES

25% (college graduates)

OF THE WORKFORCE PAYS

51% OF THE

INCOME TAXES


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CHILDHOOD EDUCATION



Loyola University


LOW INCOME GROWTH LEADS TO :DETERIORATION OF ECONOMIC CONDITIONAND QUALITY OF LIFE

Lower per capita income

Decreased tax base / Budget deficits

Lower bond ratings

Decreased school funding and teacher salaries

Less & fewer public services

Lower quality of life


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CHILDHOOD EDUCATION



Loyola University


Import the talent

Export the job

Grow the Talent here

THREE TALENT OPTIONSFOR PRODUCTION


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CHILDHOOD EDUCATION



Loyola University


WHY ISEARLY EDUCATION

IMPORTANT?


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CHILDHOOD EDUCATION



Loyola University


Third Grade Reading Skills Learn to Read Read to Learn

Forty-Minute Assessment 80% Accurate

WHY EARLY EDUCATION?AN EARLY FULCRUM


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CHILDHOOD EDUCATION



Loyola University


ACHIEVEMENT GAPESTABILISHED EARLY


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CHILDHOOD EDUCATION



Loyola University


ACHIEVEMENT GAPDEPENDENT ON THE MOTHER’S EDUCATION

Source: Prof. James Heckman, Nobel Laureate, University of Chicago


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CHILDHOOD EDUCATION



Loyola University


POVERTY v. EDUCATIONUSE THE CORRECT POLICIES

Ed ≠ f (Poverty)

Poverty = f (Education)


10/13/06


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CHILDHOOD EDUCATION



Loyola University


NEW ECONOMIC DEVELOPMENT MODELUSING THE RIGHT TOOLS

• Traditional economic development tools produce a zero public return or worse.– See A. Rolnick, Federal Reserve Bank of Minneapolis

• Returns to high-quality early-childhood initiatives produce huge returns.−Perry Preschool 40-year study reports $17-to-$1 total

and $13-to-$1 public benefit-cost ratios.


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CHILDHOOD EDUCATION



Loyola University


WHAT MORE DO YOU NEED?THE QUESTIONS HAVE BEEN ANSWERED

What are the returns?17: 1 returns; 80% to the Public

Is it fiscally prudent? Tiny fraction of total public school funding

What is the greatest job need? Skilled, creative, interactive occupations

What is your alternative investment? Not a new mall !


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CHILDHOOD EDUCATION



Loyola University


• Postponing the Investment only postpones the Rewards

• It’s Good for Kids, It’s Good for Business, It’s Imperative for the Future

EARLY CHILDHOOD EDUCATIONBETTER SOONER THAN LATER


10/13/06


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CHILDHOOD EDUCATION



Loyola University


Dennis K. Winters, Vice President & Director of Research

Phone: (608) 441-8060

Email: [email protected]

Fax: (608) 441-8064

Website: www.northstareconomics.com

economic development and early childhood education

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