1. The Economic Development Potential of Promise Programs Michelle Miller-Adams, Visiting Scholar W.E. Upjohn Institute for Employment Research Magen Parker, Director, Corporate Affairs Murphy Oil Corporation October 20, 2011

2. Session outline Introduction to Promise programs and their potential economic effects Initial economic impact of the Kalamazoo Promise Initial economic impact of the El Dorado Promise Questions and discussion 2

3. Promise Programs – Basic Principles Promise communities are those that invest in education and economic development through place-based scholarship programs. Most commonly cited goals are: –Increasing access to higher education –Changing the culture of the schools and community –Stimulating economic and community development 3

4. Key Characteristics of the Kalamazoo Promise 1)Place-based – Recipients must reside in the district and attend/graduate from Kalamazoo Public Schools (4-year minimum) 1)Universal – Every student who graduates and meets residency/enrollment requirements in eligible. 2)Flexible – scholarship can be used at any of 44 public Michigan colleges or universities; students have 10 years within which to use their scholarships 3)Generous – covers up to full tuition and fees; first-dollar scholarship; set up to continue in perpetuity 4

5. 5 Intended Effects Attract additional firms that value a skilled workforce Attract additional families that value education Increase skilled workforce Increase graduation rates Increase college application and admission rates Increase high school graduation rates Increase enrollment and retention rates

6. Potential Economic Effects Short- and medium-term -Increased funding for schools -Scholarship dollars that remain local -New school construction (bond passage) -Increased number of households due to in-migration -Increase in consumer spending -Increase in housing values and construction Long term -Creation of better-educated workforce -Population increase -Rise in tax base 6

7. Intangible Effects Reputation and national profile - Example: 100 Best Communities for Young People award Community identity and morale - Example: Kalamazoo as an Education Community Catalyst for community engagement and alignment - Example: Creation of Learning Network of Greater Kalamazoo 7

8. Economic Benefits to Students Employment prospects are greater for those with college degrees. 2010 Unemployment rates Bachelor’s degree 4.2% Some college 10.0% High-school diploma 9.7% Less than high school15.3% Earnings are higher for those with college degrees Incomes are 73% higher with BA degree than HS diploma The gap has grown by 70% since 1980 8

9. Economic Benefits to Region A 1% increase of college graduates in a region’s workforce increases wages by 1.3% –Affects the wages of high school dropouts (1.9%) more than the wages of other college graduates (0.4%) A 1% point increase in share of college graduates increases the number of patents by 0.9% –Reflects the ability of skilled workers to produce and use technology –Suggests that skills may be a crucial part of the reinvention process of cities and regions –Particularly important for regions with declining industries 9

10. Flint Youngstown Kalamazoo Ann Arbor Boulder Austin Per Capita Income Growth and College Degree 10 % Bachelor’s degree Per capita income growth

11. Enrollment Effects of the Kalamazoo Promise 11

12. The Economic Value of Increased Enrollment Under Michigan’s school finance system all operating costs financing is essentially fixed by state law –Foundation grant of $7,765 (2009-2010) With 2,405 additional students, additional district revenue from increased enrollment equaled $18.7 million Each additional student brings in a net surplus of around $2,500 ($7,765-$5,000) Families coming to KPS from outside the area bring additional workers to the region, possibly leading to higher house values and commercial property values Enrollment increase brings new hiring, new school construction 12

13. 13 YearEnrollment% of Promise Increase from Increased Entry Rates Decreased Exit Rates Fall 20061122053.346.7 Fall 20071131544.056.6 Fall 20081164740.659.2 Fall 20091210634.664.4 Higher enrollment immediately after the announcement of the Promise was due mainly to an increase in entry rates, but continued enrollment growth is due more to a reduction in exit rates. What is Driving Enrollment Increase?

14. 14 Strong Pattern of Local College Attendance Institutions attended by Kalamazoo Promise recipients, Spring 2010

15. Possible Secondary Effects Increased in-migration of people with higher education and the desire to live in a community that places a high priority on education Increase in housing values Greater resources in area Focus on development of the urban core Benefits the entire region Increase in discretionary dollars in the region Greater demand for local higher education institutions Improvement in local educational institutions from increased resources and better alignment with goals and objectives 15

16. The Housing Market Promise programs should increase housing prices Influx of residents responding to the Promise Benefits of Promise (reduced college expenses) capitalized in housing prices BUT high discount rate for future scholarship benefit AND barriers to mobility in stagnant economy Studies show that educational spending and school quality increases housing prices One study shows a small, but statistically insignificant effect of the Promise on housing prices, using counterfactual –$5,049 or 1.2% –Affects higher priced homes more than lower priced 16 Ashley Miller, “College Scholarships as a Tool for Community Development: Early Evidence from the Kalamazoo Promise,” Princeton University 2008

17. Community Engagement 17 Promise programs must be leveraged for economic gains to materialize. Students need support to: Understand the benefits of a college education Prepare for college while in K-12 Meet the rigors of college education Employers need to appreciate the benefit of a well-educated labor force and create high-end jobs in the local area In Kalamazoo, the community has rallied around the Promise-based vision of a student-centered, place-based economic development strategy

18. Guiding Questions for Discussion How can a Promise program contribute to your community's economic development goals? What are the most promising models for engaging business and local/state government as critical partners? How will the community hold itself accountable for progress? 18