Return on investment fromQuality Early Childhood Education

 Partnership for America's Economic SuccessThe Pew Charitable TrustsInnovative financing techniques for early childhood programsMonday, Nov. 23, 2009

Congressman Jared Polis

Why is Access to Quality Early Childhood Education (ECE) So Important?

IQ’s Letters and numbers Behavioral problems Parental involvement with their school Brain Development It is estimated that at least ½ of the

achievement gap exists prior to children even entering kindergarten.

What does the research tell us?

Conclusive Research Findings

• Numerous long term studies tracking outcomes for children receiving quality ECE

• Overwhelming evidence showing strong positive impact of ECE

• Studies include:– Perry Preschool Project– Abecedarian Project– Barnett Study of Studies– Entwisle Socialization Study– Federal Reserve Economic Impact Analysis

Perry: Educational Effects

0% 20% 40% 60% 80% 100%

Didn't requirespecial education

Graduated fromhigh school on

time

Age 14achievement at

10th percentile +

No-program group Program group

Source: High/Scope Educational Research Foundation

Abecedarian: Educational and Health Effects

0% 20% 40% 60% 80%

Attended a Four-Year College

Non-Smoker atAge 21

Didn't Repeat aGrade

No-program group Program group

Source: Carolina Abecedarian Study

Barnett Summary of Student Success

• Overwhelming evidence across all studies of long term student success

Retention rates

0%

10%

20%

30%40%

50%

60%

70%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Study Number

Perc

en

t

ECE Control Group

Barnett Summary of Student Success

• Overwhelming evidence across all studies of long term student success

Special education rates

0%

20%

40%

60%

80%

100%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Study Number

Pe

rce

nt

ECE Control Group

Barnett Summary of Student Success

• Overwhelming evidence across all studies of long term student successHigh school graduation

0%10%20%30%40%50%60%70%80%

1 2 3

Study Number

Perc

en

t

ECE Control Group

Barnett Summary of Short Term Studies

– All show immediate IQ gains averaging 8 points– All show positive impact on language skills and

behavior– Study with parental education component shows

increased expectations for children

What is the economic impact of

ECE?

Perry: Economic Effects at Age 27

0% 10% 20% 30% 40% 50%

Never onwelfare as adult

Own home

Earn $2,000 +monthly

No-program group Program group

Source: High/Scope Educational Research Foundation

Perry: Effects at Age 40

0% 20% 40% 60% 80%

Employed

Arrested 5x+

Earned $20K+

Program group No-program group

Source: High/Scope Educational Research Foundation

Perry: Arrests per Person by Age 27

0 1 2 3 4 5 6

No programgroup

Programgroup

No program group Program group

Source: High/Scope Educational Research Foundation

Perry PreschoolCosts and Benefits Over 27 Years

-$20,000 $0 $20,000 $40,000 $60,000 $80,000

Welfare Payments

Crime Victims

Justice System

Higher Participants' Earnings

K-12 Ed

Program Cost

For Public For Participant

Perry Preschool Return on Investment To Age 27

• Total Benefit-Cost Ratio = $8.74 to $1

• Estimated Total Annual Rate of Return = 16%

• Public Rate of Return = 12%

Perry Preschool Costs and Benefits Over 40 Years

$15,166

$195,621

$258,888

$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000

Total Benefit

Public Benefit

Cost

Perry Preschool Return on Investment To Age 40

• Public Benefit/Cost Ratio = $12.90 to $1

• Total Benefit/Cost Ratio = $17.07 to $1

Conclusions from Research Studies

Why Should We Care About Investment in ECE?

Highest $ return on any educational or human capital investment

Dramatic socialization benefits for kids

High educational impact

One of the most effective tools in closing the achievement gap

All of which implies…

Tremendous Opportunity for leveraging social change through investment in ECE!

New Solutions

Linking Resources to Need

• Existing environment of underfunding

• Limited Philanthropic capacity

• Lack of political will for major public investment

What funds investments in physical infrastructure?

Private capital

Examples: School bonds, municipal bonds, Treasury bonds

Creating investments vehicle for private investment in ECE

Demonstrated public rates of return on costs alone in excess of 12% over 20 years

Savings for public agencies including:

School districts, municipalities, states, counties, judicial districts, and the federal government

The Goal

To increase private funding for ECE by offering investors opportunities to share in the gains/savings that are realized over a 20-30 year time horizon from early investments in human capital.

The Product• A model for private investors to adopt a cohort of at-

risk infants, underwrite the cost of their early childhood education, and recoup that investment plus variable interest over a twenty year period. The repayment would come from state and local government agencies whose costs of serving these children will be reduced as a result of the early interventions and would share a portion of the cost savings with the investors.  

• If profitable returns can be generated and conveyed, this model provides a scalable source of resources for early childhood education nationally and internationally.

The Opportunity

Scalability:

Instantly meeting the entire accretive early childhood investment needs of the nation through capital markets

Also exportable internationally

Oversight and accountability:

• Self-interested and motivated oversight to ensure the quality of programs

• Accountability• No taxpayer risk

The Challenges

• Methodology of measurement metrics• Methodology and implementation of

conveyance of cost savings to investors• Mobility, tracking and logistics• Interagency agreements and enabling

legislation• Marketing to public and private stakeholders

Thank you for thinking out of the box to ensure that every

American has the opportunity to succeed!