Educational attainment is the single most important driver of regional economic development.

So, it’s no surprise that leading communities are starting to explore how to boost educational opportunities, as an economic development strategy. Last week, two important events took place. Both involve new types of scholarship programs.

PromiseNet 2008

Since its launch a couple of years ago, the Kalamazoo Promise has focused civic leaders on new approaches to create incentives for education. The initiative provides college scholarships to children in the Kalamazoo City Schools.

Watch a video briefing of the Kalamazoo Promise.

Educational incentives — directed toward people — have a direct impact on economic outcomes (higher incomes over a lifetime). Economic incentives directed toward companies generally do not work and are largely a waste of money.

PromiseNet 2008 brought together representatives from 75 communities across the country to explore college scholarships for city school children. The event marks the beginning of a national movement toward community scholarships. Read more: Kalamazoo PromiseNet conference to share programs’ expertise.

Early chlid education scholarships

In another event last week, I attended a conference at the Federal Reserve in Minneapolis for the Big Ten schools and the University of Chicago. We focused on the importance of education (human capital, as the economists would have it) to economic outcomes in the Great Lakes. Our major research universities are exploring new avenues of collaboration.

At lunch yesterday, Art Rolnick, an economist with the FRB in Minneapolis, briefed us on a new scholarship pilot that foucses on early child care. The scholarship program is remarkably simple: it awards parents of young children with a scholarship for early education.

This focus on early education as an economic development strategy has a strong foundation of evidence to support it. Read more. The prestigious Committee for Economic Development in Washington DC strongly supports this strategy.

The focus on early childhood development is closely connected to new learning in brain development. Here’s an excellent overview by Joan Stiles, a cognitive scientist at UCSD.

The situation in Cuyahoga County

The irony, of course, in Cuyahoga County is that the County has a leading edge early child care program (Invest in Children), but it is underfunded, needs to be expanded, and operates without significant support from the business community. Cleveland’s business leadership does not yet see investments in early child education as a core economic development strategy.

Now here’s the really sad part: Cleveland’s civic leadership is prepared to invest $400 million in public funds for a convention center — a strategy that does not work to create higher incomes. (Worse still, operating costs will drain County resources for decades. Convention centers compete in a very soft market with utilization rates under 20%.)

Cuyahoga County would be far better off if the County Commission took those public funds and created an endowment to support new scholarship programs for the county’s low income parents and children.

My guess: Few of the 20,000 people participating in Voices and Choices mentioned a convention center in Cleveland as a priority concern. They, instead, I think, talked a lot about education.

Last 5 posts by Ed Morrison

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22 Responses to “Economic development = Investing in brainpower”

  1. Brian J. Kelsey Says:

    Ed, you’re hitting on the single greatest challenge in the field of economic development, as I see it: the bias at the local level for short-term results. Of course, that problem is not limited to economic development, but I think it shows up there more so than many other areas in city, county, or regional management. You are absolutely right about child care and any other argument you want to make about the relationship between human capital and economic development. However, child care doesn’t produce too many ribbon cutting opportunities. Elected officials should be criticized for pursuing investments that don’t make any sense, fiscally or otherwise. However, until we find a way to reduce the emphasis on new buildings and jobs as evidence of “success” in this field, I don’t think we can reasonably expect local officials to make different decisions–which is also why we are all glad to have you active in the area of regional leadership! Thanks for the great post.

  2. Bill Callahan Says:

    Ed, lest we forget… the County Commissioners actually paid for a 2005-06 consultants’ study on how to use bond revenue to provide college tuition assistance to residents, and then dropped the subject.

    Also — anyone else remember candidate Frank Jackson proposing to make Cleveland “a place where the first two years of college education is free”?

  3. Ed Morrison Says:

    Brian:

    There are several components to the challenge of redirecting the energies of local politicians. Here are several speculations on my part.

    Innovative thinking rarely comes from local elected officials. The reason, in my view, is clear. Their main focus is promoting a brand (“Me”), and to do that, they tend to be risk averse. In short, the goal is not policy innovation, it is personal projection.

    (The brand, Me, also has a relatively short half life — one to two years, so you are by nature looking short term. The brand is also perishable. Talk to any local elected official who has lost a race and see how fast the brand evaporates. You can extend your brand through patronage and corruption, though. That’s what appears to be happening in the auditor’s office, for example.)

    Second, we hire politicians to take care of a piece of dirt: a town, a city, a county. In a world in which complexity calls for simple strategies of collaboration, local officials are generally not comfortable with this approach.

    Third, in Cleveland especially, we have a business community driven by projects. It’s the “Thing Theory” of economic development. (If we just build one more thing…”) The real estate interests in Cleveland have muddied the waters with their agendas and dismantled the public planning process. The problem, of course, is that real estate development is not the same as economic development, but our business leadership seems ignorant of the difference. So they push local politicians to support their project agenda to the exclusion of virtually anything else. (When was the last time the GCP made a sensible announcement about education and workforce?)

    Changing this destructive political dynamic is never easy, but it can be done. Enough people have to be fed up to make a difference, and I am not sure Cleveland has reached that point. Perhaps members of the board of the GCP can start the conversation by asking themselves what in the world they are doing.

    Bill:

    As usual, you have made more valuable connections. My guess is that the County Commissioners and the Mayor are being led by the GCP to focus on a real estate agenda, rather than a brainpower agenda.

    Big mistake.

    Real estate development redistributes wealth. Brainpower development creates it.

  4. Ed Morrison Says:

    Here is another post from Klamazoo’s paper this morning. Read more.

    And here are some of the results from the Kalamazoo Promise:

    COLLEGE ENROLLMENT: As of January, about 78 percent of students eligible for The Kalamazoo Promise from the classes of 2006 and ‘07 have used the scholarship. Fifteen KPS graduates attended the University of Michigan in 2005; 49 from the Class of 2008 have paid a deposit to enter U-M this fall.

    KPS ENROLLMENT: The Kalamazoo Public Schools’ enrollment has increased by about 1,200 in the past two years, reversing a decades-long trend of decline.

    COMMUNITY VOLUNTEERISM: Big Brothers Big Sisters of Greater Kalamazoo has doubled its number of mentors, and Kalamazoo Communities in Schools has experienced a 134 percent increase in volunteer hours. In addition, churches and other nonprofits have organized efforts around The Promise, such as the Downtown Kiwanis Club donating dictionaries to every KPS third-grader.

    REAL-ESTATE VALUES: Kalamazoo County’s 2008 value of taxable property was 3.96 percent higher than 2007 numbers, a larger-than-expected increase. County officials attributed the increase to new construction in the Kalamazoo school district because of The Promise.

    STUDENT ATTITUDES: According to a 2007 survey of about 1,000 KPS high school students, 66 percent say The Promise has made a difference in their educational plans and goals; 32 percent say they are now working harder in school, and 20 percent say The Promise has improved their lives. The survey was conducted by Western Michigan University.

    Early returns on the Kalamazoo Promise

    And BTW, why is the FFEF so quiet on the importance of brainpower to economic development?

    Where are the education reform proposals? The workforce development innovations? The metrics to measure regional progress in educational attainment? Could we, for example, set a regional goal in reducing high school drop-outs? (Reducing dropouts is only one of a number of promising leverage points to improve performance.)

    Strategy in complex open networks (like a regional economy) requires both open participation and leadership direction. The FFEF has invested heavily in the first part ($3 million for Voices and Choices), but it needs to work on the second part: articulating strategic outcomes.

  5. roldo bartimole Says:

    The extreme bungling that has been going on for years now by the Greater Cleveland Partnership along with the County Commissioners and all the mechanisms (Convention Center Authority, ect.) they’ve set up that still hasn’t produce a workable plan for the medical mart and convention center is testimony to the fact that there is no strong public reason for spending what will amount to nearly $1 billion for a new convention center.

    It’s not high on the region’s needs list, if it is on it at all.

    The Commission voted quarter percent sales tax would be better used by giving it back to the taxpayer or using it, as has been stated here, for human needs that are underfunded.

    We shouldn’t let people like Joe Roman, Fred Nance and Tim Hagan decide alone what’s best for the public agenda and our futures.

  6. Ed Morrison Says:

    Roldo:

    Watching the process borders on the comic. The Planning Commission is now irrelevant. (They have stripped out information on the convention center from their web site, but you can access a 2005 resolution here.)

    The Cleveland-Cuyahoga County
    Convention Facilities Authority
    no longer operates.

    We now have a group of businessmen meeting in private to determine where this huge facility will go. (Anyone bother to check conflicts of interests with one of the major parties, Forest City?)

    And, this group, somewhat belatedly, I assume, decides they need to do more traffic analysis to estimate the costs. (Someone must have realized that convention centers generate truck traffic.)

    Of course, it’s hard to read the recent history of the convention center fiasco in Cleveland without concluding that Forest City is pushing hard for the Tower City site, and that those two delightful Cleveland characters, Al Ratner and Sam Miller, will not be satisfied until they get their way.

    I only hope that we have enough sense to put their names on the building in big block letters. (Don’t forget that big bronze plaque for the Commissioners.)

  7. roldo bartimole Says:

    Ed:

    I believe they are having trouble with MMPI – because MMPI is in the driver seat and probably wants much greater subsidies.

    The Commissioners, Hagan in particular, put MMPI in the driver seat by passing that sales tax increase. The dough is there at $40 million a year and all MMPI has to do is wait.

    Even Sam and the Ratners have to wait, though I agree they have been backmailing the County, likely with the threat that they are out of town if they don’t get the new convention center.

    MMPI has the cards because Hagan predicated a new convention center on the building of a Med Mart.

    We don’t need a new convention center and we certainly don’t need a med mart with a convention center since they compete against each other for meetings.

  8. roldo bartimole Says:

    Just after posting the last comment I see on Cleveland.com that Dennis Madden, the County Administrator, is signing up with MMPI.

    They’re going to change the name of Cuyahoga County to Sweetheart Deals, much more appropriate at this point.

    Can anyone say Hagan loves Kennedy and Kennedy loves Hagan back.

  9. Justin Balck Says:

    Are we missing something here? Just as Warren Buffet invests in businesses that he understands (Dairy Queen, insurance cos.), do the powers that be see something in putting a convention center in Cleveland that the rest of us do not?

    How can Cleveland compete with New Orleans (even post-katrina), Las Vegas, Orlando, Chicago etc. in the convention center business. What is it that would make people want to come here for a convention? What am I not seeing??

    Conversely, if the cities above had our current convention center, would people still go there for meetings? I think that the answer is yes – which implies that it’s not the center but the city.

  10. Ed Morrison Says:

    Justin:

    You are assuming that competing in convention centers makes sense. It doesn’t really.

    These facilities require considerable subsidies; the jobs generated by business meetings do not raise incomes; and the evidence is clear that there are far better alternatives for public investment.

    The pressure for a convention center, from my perspective, is all about a decade-long effort to rescue Forest City from a failed investment in Tower City. It has nothing to do with much else.

  11. Ed Morrison Says:

    Roldo:

    My guess: Dimora and Hagan would be quick to criticize the close relationship between Cheney and Haliburton and the no-bid contracts Haliburton has received.

    Yet, apparently, they see nothing wrong with a no-bid contract with MMI and Madden’s recent move.

    Situational ethics.

  12. John Ettorre Says:

    Hate to disagree with you all here, but I (mostly) do. To Justin’s point, about how we can’t compete with the top-tier general convention cities, which are better draws because of weather and other attractions, that’s precisely why the powers that be here have decided to try to niche it into something medical related, where we do have powerful built-in advantages and some real critical mass. All you have to get a flavor of that possible future is spend a little time at the giant hotel attached to the Cleveland Clinic and observe the constant cycle of large medical meetings, or look at the reports about the contemplated growth in the health care industry over coming decades with the Baby Boomers hitting their golden years to understand the thinking that has been going into this.

    Just because convention facilities are overbuilt around the country and in our region, doesn’t mean that we should drop out of the competition entirely. That strikes me as a wrong-headed approach. If your sports team is several levels behind the competition, you don’t give up. You just redouble your efforts to be that much sharper and smarter (not that I think we’ve been any of that thus far with this county sales tax strategy and the absurd tactics of giving up all your leverage to the would-be developers).

  13. Ed Morrison Says:

    John:

    Economic development — like most things — is a game of probabilities. Building a $400 million convention center is not a very safe bet.

    That said, I do think we could be a great deal smarter about development opportunities in Cleveland. But there is no coherent strategy here…only a string of unrelated projects. The public planning process has collapsed.

  14. John Ettorre Says:

    No, I agree that a coherent strategy is crucial. But (and I think you of all people can appreciate this, and perhaps agree) I think there is a somewhat coherent economic development strategy in this town. It just often doesn’t seem that way, because so much of it takes part out of the public eye and is otherwise cloaked by its main drivers, who pursue it as stealthily as is humanly possible.

  15. roldo bartimole Says:

    John: You are rather nonchalant about spending $40 million plus a year for 20 years, that’s $800 million.

    Also, I’d say that the future is right there in that “giant hotel,” the Intercontinental that you sight.

    It has 29 meeting rooms, 3,091 square feet of meeting space, a theater that holds 1,800, classroom, 1,000; and banquet services for 1,000 and more.

    The only reason for the medical mart is to make this unpalatable deal more palatable to the paying public.
    Because without the med mart idea, which sounds viable but isn’t, a new convention center makes no difference.

    Further, how many money losing institutions can this city afford.

    I think there are plenty of facilities – not to mention the IX center – for meetings and the declining conventions in this city. They are around but they are not property utilized.

  16. roldo bartimole Says:

    John: You are rather nonchalant about spending $40 million plus a year for 20 years, that’s $800 million.

    Also, I’d say that the future is right there in that “giant hotel,” the Intercontinental that you cite.

    It has 29 meeting rooms, 3,091 square feet of meeting space, a theater that holds 1,800, classroom, 1,000; and banquet services for 1,000 and more.

    The only reason for the medical mart is to make this unpalatable deal more palatable to the paying public.
    Because without the med mart idea, which sounds viable but isn’t, a new convention center makes no difference.

    Further, how many money losing institutions can this city afford.

    I think there are plenty of facilities – not to mention the IX center – for meetings and the declining conventions in this city. They are around but they are not property utilized.

  17. John Ettorre Says:

    No, the cost is certainly an issue, and naturally I don’t like paying more sales tax just like everyone else. We’re beginning to price ourselves out of the market that way. But I also think we need to do something fairly dramatic to jumpstart the region’s fortunes (not that this is the highest thing on the list of possibilities), and as you say, obviously it’s got to deliver the most bang for the buck.

    The IX center, unfortunately, is a non-starter as far as convention facilities go if you’re looking at the critical mass issue–making sure that hotel rooms, restaurants, sporting events, live shows, downtown residents and conventions work together to bring a critical mass of people to a downtown area, so as to create enough energy to make it feel like a place that people want to be. That’s a simple game of location, location, location. Finally, this convention center can’t be thought of as something of the city only, but one borne by the entire region. The entire county is paying the bill, after all.

  18. Ed Morrison Says:

    John:

    How about returning to the original idea I posted and which — as Bill Callahan notes — there’s been some groundwork done: Provide scholarships.

    Now that’s a new idea that is tightly tied to what we know works to boost incomes. (Thanks to work at REI by Mike Fogarty and Paul Gottlieb.) It also places a lot of smaller bets on people who deserve a shot.

    On a whole lot of levels, I’d rather be investing our sales tax money on an innovative incentive program that shows enormous promise, not a thirty year old idea that has little evidence to support it.

    Of course, we have no choice here…the civic process in economic development, which never worked all that well in Cleveland to begin with, has completely broken down.

  19. John Ettorre Says:

    Good point. I agree that’s a far better use of our limited investment dollars. But then, we have a very long tradition in this region of investing in bricks and mortar over brainpower. The Ford Foundation noted that in a report many years ago. And the context wasn’t exactly complimentary.

  20. John Ettorre Says:

    By the way, here’s an interesting new development in the Med Mart sales tax issue. I think we’ll be hearing lots more calls like this to suspend the tax if there isn’t some movement soon on where, when and how it’ll be built. Of course, the legal mechanics of suspending it probably aren’t so easy to set into motion. Can anyone enlighten us on that issue? (preferably someone who actually knows how Ohio law treats this).

    http://blog.cleveland.com/metro/2008/07/sutherland_calls_for_suspensio.html

  21. roldo bartimole Says:

    What we don’t need to do is something really dramatic.

    What we need to do are the undramatic things that help make community.

    We did dramatic things in the 1990s – Gateway, Browns Stadium, Rock & Roll Hall of Fame.

    However, Cleveland is suffering from lack of doing smaller things, and education obviously is one of the things. I note again, none of the above mentioned pays any property taxes – as the convention center and medical mart won’t – which is primarily Cleveland school money.

    And finally, NO the region is not paying for any of those things. Cuyahoga County and Cleveland are footing the entire bill for ALL the mentioned in addition to countless other venues enjoyed more and more by the region as people push farther out.

    Another example in today’s newspaper will have CSU – the working or middle class college once again paying for Playhouse Square.

  22. Ed Morrison Says:

    John:

    I came back form a conference at the Minneapolis Fed last week among the Big Ten provosts. Economists spent aome time reviewing the private and public returns to education. I won’t get into these now, but they are remarkable given alternative investments in bricks and mortar.

    (The most remarkable statistic: private returns for completing high school are about 50% and growing. The reason: the market has fallen apart for high school drop-outs. Yet, as Education Week recently pointed out, the high school graduation rate for Rep. Tubbs Jones district is only about 50%. Learn more here.)

    Convention centers, as an analysis of the Pittsburgh convention center by Carnegie Mellon shows, are likely to generate public returns less than zero. You can download their analysis here.