Early Education and the Future of the Massachusetts Economy

October 8, 2003

Opening
Paul O'Brien, President, The O'Brien Group, Inc., Early Education for All Campaign Co-Chair
 
Keynote
Arthur Rolnick, Senior Vice-President and Director of Research, Federal Reserve Bank of Minneapolis
"Early Childhood Development: Economic Development with a High Public Return"
 
Moderator
Paul Reville, Executive Director, The Center for Education Research and Policy at MassINC
 
Panel
Mara Aspinall, President, Genzyme Genetics, Early Education for All Campaign Co-Chair
Roger Brown, Executive Chairman and Co-Founder, Bright Horizons Family Solutions, Inc
The Honorable Thomas Finneran, Speaker, Massachusetts House of Representatives
Kathleen Kelley, President, Massachusetts Federation of Teachers
Rosa Smith, President, The Schott Center for Public and Early Education
The Honorable Robert Travaglini, President, Massachusetts State Senate
 
Special Presentation
Mike Sheehan, President and CEO, Hill, Holiday, Connors, Cosmopulos Inc

Event Transcript
At this event, Senate President Robert Travaglini told an auditorium full of early education supporters that building a coalition of public and private supporters of their ambitious plan will get the attention of Beacon Hill policy makers. House Speaker Thomas Finneran agreed, but said that in these tight fiscal times, investing in one popular cause often means retreating from another. Travaglini and Finneran spoke at a Verizon Auditorium forum, attended by approximately 250 business leaders, policymakers, and educators.

The Early Education for All Campaign has launched a media campaign to tie its plan to economic development. Campaign officials say kids that benefit from high quality early education are more likely to excel in school, stay off welfare and out of jail, and to later become good parents themselves. And they argue further that if Massachusetts is to attract jobs and professionals, it must put in place a comprehensive early childhood education system.

Few disagreed with those major points. Instead, speakers said the challenge is to draft a strategy to make their dream a reality. This requires convincing the Legislature and the Romney administration to embark on a long-term funding commitment during a period of fiscal austerity that is forcing large budget cuts.

The following is a summary, not a verbatim transcript:
Donna Cupelo, Regional President, Verizon: This will be a great program discussing the link between early education and our economy. We have wonderful speakers with a great deal of expertise and insight. Verizon has a long history of commitment to education. It is fitting that we host this opportunity to share and learn together. I want to introduce Paul O'Brien, who spent many years in telecommunications as the chief officer of Nynex, and is a leader in the Early Education For All campaign. He has made a personal and professional investment to the community.
Paul O'Brien, President, The O'Brien Group, Inc.: Early Education for All Campaign Co-Chair: Thanks to Donna. Verizon has been a leader in educational endeavors. I feel a little like George C. Scott in "Patton." I am back here and God I love it. I feel like I am back in business again. I am co-chair of Strategies of Children.

Arnold Hiatt really was the precursor for a lot of work we are doing here when he was CEO of Stride Rite. He had one of the first childcare centers that was corporate based. I am pleased to work with Reverend Owens, Mara Aspinall, and Margaret Blood, the soul of the campaign. The campaign is a growing one. We are working in partnership with grassroots leaders and state leaders. Our objective is to provide high quality pre-school education and full-day kindergarten for every child within the next ten years. It's an ambitious undertaking but one that we think we can accomplish. This is the first forum we have had at Strategies for Children and Early Education.

The topic of this forum, early childhood education as an economic development strategy, is a little unique. Businesses understand that children need to show up for school ready to learn. The key to success is human capital and investing in early childhood education is the right thing to do and the smart thing to do. The two have not been tightly linked in the past. The Department of Education is studying the issue. Across the country people are talking more broadly and we want the discussion to be public here in Massachusetts as well.

So here we are. We are delighted to be joined by Speaker Finneran and President Travaglini. Sen. Berry and Rep. Larkin are here. We appreciate the support from a variety of organizations. Massachusetts has always prided itself on its educational system. We have made significant investments through education reform. We did this in a very bad economic time. The late Jack Rennie, the founder of the Massachusetts Business Alliance for Education, said early education is the unfinished element of education reform. A leader nationally is Dr. Arthur Rolnick. He is a researcher at the Federal Reserve in Minneapolis. His research ranks from the economics of federalism to the economics of early childhood development. Please welcome him.

Arthur Rolnick, Senior Vice-President and Director of Research, Federal Reserve Bank of Minneapolis: It's an honor to be here for a number of reasons. John Adams clearly had a strong view on this topic. In that constitution, he spoke of the need for public education and its importance to a strong democracy. Massachusetts for so many years has been a leader in education.

I want to start with a commercial - minneapolisfed.org is our web site. My talk is based on a paper on that web site. In two weeks, we will have the proceedings of a conference there.

Let me go back seven years. I was invited by Sen. Kennedy to come to Boston. Raytheon was thinking of moving business out of Massachusetts. Sen. Kennedy read work that we had done on economic bidding wars. We were allowing states to lure companies from each other and it was counter-productive. It was not economic development but moving jobs around. The public return was very small. Sen. Kennedy was very interested in that concept.

I would like to go through three points. Why is the Federal Reserve involved? You think of the Federal Reserve and inflation and business cycles. Why is the economic return in early education so important? Why are we asking public policy makers to rethink investment in an area that is under-funded? The Federal Reserve was established in 1913 to prevent banking panics and promote economic development. We were supposed to be the banker's bank. They created 12 district banks. Boston is the home of the first. The president of each must come to Washington every six weeks to meet with Mr. Greenspan to talk about controlling the amount of money in this economy. Congress also told each district bank to monitor the economies and promote good policies through research.

I serve on a number of non-profit organizations including the Governor's Council on Economic Advisors in Minnesota. It was often the case that a company would tell Minneapolis that they were thinking of coming or staying and wanted to know what the city could do for them. We said allowing bidding violates the constitution and is bad for commerce. The return was not just zero. It was negative. You are having government interfering with location decisions. We have a bill in Congress to end this, but I am not saying it's going anywhere. You cannot unilaterally withdraw from bidding wars. Our criticism was with Congress for allowing states to pursue these bidding wars. When economists looked around the world and said why do some countries progress, a number of factors came up. One factor is human capital, the development of a workforce. The IMF is rethinking its policies. You have to educate the kids and the workforce to have a chance at real sustained economic growth.

We had an organization called Ready for K in Minnesota. They had a proposal, and I thought they had the economics wrong. They said fine, you come on the board. Out of that experience came this essay that I mentioned. So why should we think of early childhood development as economic development with an extraordinary rate of return? Boeing is thinking of building a new factory. Washington, despite budget problems, came up with a bid of $3.5 billion for a factory that is going to create 2,000 jobs. When I am told that there isn't money for early childhood education, I don't buy that. Alabama lured a Mercedes plant several years ago. It's economic snake oil. We found many of these subsidies for businesses are for economic events that would have happened anyways.

We took a look at an early 1960's study. They had a controlled group that went along with virtually no early childhood ed and the other group got an intensive program, including home visits. We are talking about $12,000 per kid per year. Head Start is about $7,000. They followed the kids for 30 years. The first ten years, there were no major results. Twenty years out the kids were more successful in school and less disruptive and they got good jobs. Thirty years out the long-term non-cognitive effects were dramatic. There was a return of every dollar invested of about eight dollars. When you convert it to an internal rate of return, it was 16 percent real rate, inflation adjusted. Any venture capitalist would tell you early education is under-funded.

We divided the 16 percent return into public and private gains. Our bottom line is this is a public investment. Four percent of the return goes to the individual. Twelve percent is public. The kid starts ready for kindergarten and is less disruptive, more likely to stay off welfare and the crime rate goes down. Even if we have overstated this and we are wrong by a half, an eight percent return is extraordinary. The 16 percent does not count the parent with other children and to the extent they do a better job with the other children, we don't have a handle on that. We also don't have numbers on the children of the children. Preliminary data suggests they will do better. So we have a chance of breaking the poverty cycle. So economic development - yes, I would say it cries out for more funding.

I talked with the last administration, Gov. Ventura on this. On a lot of issues he was quite good with the economics. When I broached this issue, he said that's the mother's job, and I got no further. The current administration said we need something in the next two years to push the economy and this long-term view is fine for you guys at the Fed. You are not going to see a pretty new building. This is not concrete. You are not going to see a new hockey team or a new Target store. There is a new headquarters for Best Buy. They got a $60 million subsidy. I argue all those things happen without a subsidy. It makes this job difficult. But based on the economics, we are significantly under-funding an area that needs attention.

Paul Reville, Executive Director, The Center for Education Research and Policy at MassINC: I am delighted to be here. There is no topic more important in education reform. I want to thank my panel in advance. We have the right group here to talk about these issues.

It is amazing so far that no one has mentioned the Red Sox. Let me suggest a metaphor. If I surveyed the audience, it would be overwhelmingly in favor of the Sox beating the Yankees. We would not need much of a conversation. If we started a conversation about how we might beat the Yankees it might be of interest. The question really is one of strategy. We all agree early education is critically important. The really interesting portion of what we have to talk about is how do we get there? So that's our task, to really have a strategic discussion here today. Let me begin with where our speaker left off. He made a powerful argument. Is there anyone who would take exception to it or are there economic development priorities that supercede the focus on early childhood education?

Mara Aspinall, President, Genzyme Genetics, Early Education for All Campaign Co-Chair: There is no other priority that is higher for economic development than early childhood education. The key to business growth is employees; good employees come from an availability of quality staff; and the only way to secure high quality staff is to ensure a high quality educational system. The only reason we can't grow in a location is we can't get good quality young people. The second piece is bringing good senior staff. They want a good education system. We cannot attract them without it. And it starts before kindergarten. Both short-term and long-term, we need to build a foundation to ensure businesses come to the state and stay in the state. We have studies with a 16 percent payback.

Moderator Paul Reville: Mr. Speaker, you have come forward with an economic development plan, and I know you are a strong supporter of early childhood education. What does it take?

The Honorable Thomas Finneran, Speaker, Massachusetts House of Representatives: You have to effectuate a marriage of interests that usually does not come together. That marriage would be between business leaders and education leaders such as Kathy Kelley and people around educational services. The passage of education reform was very instructive. It would not have passed without the leadership of the business community. That elevated it to a certain level. Until that had happened, interest and debate around education carried itself forward in a vacuum. It took the persistent efforts of business leaders to underscore how important it was to their companies. It took that, more than anything else, to get that over the finish line. That is probably what will have to occur on this issue as well. It was a very difficult time before education reform. For all the folks gathered here, you have to pay attention to all the detail, as boring and depressing as it may be, that we have to grapple with. This debate and this discussion does not occur in a vacuum. We have existing needs in education and higher education. Transportation is deteriorating. Human services need no elaboration. We are in an increasingly almost life-and-death cycle to protect what we had in the 1990's. That does not take away from the argument that Art made.

Rosa Smith, President, The Schott Center for Public and Early Education: They said we would put a man on a moon and we did that. It does not seem impossible to say we need a state full of employees in ten years where we have the state that is the most literate. It is in many ways about public will. We have states in severe crises that are making tough decisions on education. We make tough decisions in our budget process, and I hope we do not make those decisions wherever possible on the backs of children. [Applause]

Moderator Paul Reville: We have heard an economic development argument and moral argument, and the Speaker has laid out the context. To the Senate President, you have a budget crisis and competing priorities. What do you see as the impediments to realizing this goal and what help do you need to overcome this?

The Honorable Robert Travaglini, President, Massachusetts State Senate: Some of the factions here have not always worked to maximum capacity toward this goal. You can sustain and maintain chemistry and get the attention of people. There are some items that should not be subject to the fluctuation of the economy, and this is one of them. The Speaker and I have had this conversation. We have funded this program to the degree to which we are capable. Sen. Berry is sponsoring legislation of which I was the lead sponsor. It is clear evidence of our willingness to fund this program.

What will get our attention and the attention of our colleagues? Initially the merits and the passion of the argument will get our attention and then it shifts to arithmetic and awareness of our personal character. When you analyze the benefit of reinvestment that is what catches my eye. Anytime I can give five dollars and get 15 back, I try to mirror that.

Roger Brown, Executive Chairman and Co-Founder, Bright Horizons Family Solutions, Inc: The historical critique is accurate. Margaret Blood tried to get on my calendar for quite some time. I said that I would not get involved in a failed effort. She is the muscle of this effort and convinced me to join. I don't know anybody who is against this. We have the private sector, non-profits, businesses, pediatricians and we got Staples and EMC to sign on. By the time Margaret gets done, we will have every major Massachusetts business behind this. Everyone is united and fully supportive of this. It allows everyone who wants to participate to participate.

Moderator Paul Reville: What does it take to energize the labor market in this field that has been traditionally underpaid and undervalued?

Kathleen Kelley, President, Massachusetts Federation of Teachers: The mixed delivery system is critically important. The field understands the need to work together in the best interests of students. I think the field is energized. I think it's a no-brainer. This is a win-win for everyone involved in this. I believe the Red Sox will win the World Series, and I believe early education for all is going to pass. We don't grow corn or cotton. We have in this state a wonderful example of what it means to be committed to a comprehensive committed education plan. That happened over nine years. The missing piece of that - we have all got to get on board now. It's not going to be easy. Given all the last newspaper stories on the structural deficit and a lot of people fighting over small amounts of money. We have to educate the public as well as the Legislature that this priority cannot be put on the backburner.

Moderator Paul Reville: So you see victory as possible?

Kathleen Kelley: You have the two leaders of the Legislature that are clearly in our corner. We are going to have to look at the resources to fund it. It may have to be phased in. There is no doubt we have to do it now.

Moderator Paul Reville: What are the strategies to put this campaign over the top?

Mara Aspinall: We brought the education and care community and parents together. The third group is business. Our first strategy is to go to leaders at the State House and make sure we have a coalition willing to support this and to make the tradeoffs. The business community understands there are tradeoffs. We went across the state and met with thousands of people. We put together legislation that gets to workforce development. This is better funding towards workforce development. The turnover is 29 percent a year in early education teachers. They should not meet a new teacher three and four times a year. Teaching is not something you do between jobs. People need to be able to make a living.

We seek a ten-year plan to phase this in, starting with workforce development, move to a curriculum for each center and thirdly ensure that each child has a four-hour day that is partly state-funded and then fourth, moving to full-day kindergarten. We are doing a very large statewide poll to ensure that we have the support.

Moderator Paul Reville: Sound like a winning strategy?

Senate President Travaglini: Yes it does. In spite of the decisions we routinely have to make, there are two numbers that are most important to me: 81 and 21. That's the simple majority in the bodies. If you can get 21 senators to come to me making this a top priority, that's going to make my job a lot easier. I go to chairman Murray and say there are 25 senators that make this a priority. Rather than have this myriad of priorities that differ dramatically, if you could focus and get commitments from my colleagues to make this one of their top two priorities, then it becomes a no-brainer.

Moderator Paul Reville: Mr. Speaker, say you are a political strategist, what is your advice about this strategy?

Speaker Finneran: Make sure there is a Speaker there with a long term ahead of him to see this through. I have to go back to the issue of context. I make a brief reference to what is going on in Washington. There is a great deal of consternation and legitimate criticism of the administration for the failure to think through their decision about Iraq and the context of the post-war situation in Iraq. Look at that as an example of leadership and thinking things through. Go in with a keen understanding of what the situation is.

This meeting has a tendency to run away from ourselves and become a revival meeting. Cheerleading is not going to get this done. K through 12 and higher education, we could go on about unfunded contracts that are negotiated and ratified. I didn't mention the extraordinary burden of debt and the long list of capital projects. Mara talked about the quality of workforce. What the heck is going on in the housing market in Massachusetts? No person in the world can afford that. Health care. Our Medicaid budget is about $6 billion and is going to grow at the rate of 15 percent. That requires $900 million in new money just to hold the static position of Medicaid. No one is happy with Medicaid as it exists. I need $450 million. We will have between $200 million and $250 million in new revenues. So you have to cannibalize existing programs to hold Medicaid harmless.

The risk, I would say to this group, is there is a huge risk attached with being overly ambitious. Despite all the good feeling and commitments public officials will make, there is a risk that it is unsustainable and that will undercut your momentum. There is an equal danger in the reluctance to choose. When this is described, it is not a no-brainer because the embrace of the policy requires decision makers to choose. When we say yes to this, by definition we are saying no to something else. When this occurs at the State House, everyone runs from the room. There are usually two people left, the Speaker and the Senate President. Nobody wants to acknowledge that something has to give. People say don't embrace this on the backs of something else. It would be foolhardy to assume that the miracle of the 90s will return. It was in large measure a mirage. That type of economic growth will not occur at any time over the next ten years. We are going to inch along and resume more traditional rates of growth.

Moderator Paul Reville: Rosa, you challenged us earlier that this was about will. How do you respond?

Rosa Smith: At the end of the day, our legislators are going to have to come together and make decisions. I suggest they are informed decisions about the future of economic development. They need to help the public understand the long haul. Strategies for Children has an appropriate strategy in phasing this in. I challenge us to wonder why they can do it in some other states. We are going to make decisions. We want them to make more informed decisions and decisions based on research. There is a way to have a strategy around marketing so it can get to everyone in an intellectual and emotional level. It is a challenge, and I recognize that.

Moderator Paul Reville: Say you are in the room with the Speaker, Senate President and the chairs of Ways and Means. Where does the money come from? Assume it's zero sum game. Assume we need to find new revenues.
Rosa Smith: I can't answer the question right. But I was a school superintendent. In the budgeting process, a disproportionate amount goes to high school. What I did was I took the same amount and started moving it to the pre K and the K-3 so we could start building. I applaud the kind of phase in and down-payment toward this kind of work.

Arthur Rolnick: The Speaker's comments are very important. I disagree with him on the economics. You are living in the best economy we have ever been in. There are going to be ups and downs. Look at the 90's and it was remarkable, the wealth created. Why are home prices going through the roof? We are a very wealthy economy. It isn't that we don't have the resources. We do. It's a question of priorities. There are limited resources even though we are a wealthy economy. They have to decide between transportation and early childhood development and health care. We look at return to the public. I would put early childhood development up against almost any other program. That is where you start to reallocate. You should start with the early years because that is where the big return is. I agree and disagree with the no-brainer argument. Policy makers have all kinds of public needs to address. Make the argument as clear as you can and talk about return. Get the business community involved. The governor in Minnesota said to bring the major CEO's to the table and then we will start talking.

Kathy Kelley: The administration has to be brought in a real way and so does the public. It's a no-brainer for all of us here. But we have already cut $1.5 billion from programs like health care and higher education. We have reallocated the money already. The public is going to be very leery about having their basic human needs in competition with an investment for the Commonwealth. What are the needs of this state? We have to be accurate and rational about that. We may have to talk about new revenues. The revenue picture is pretty tough right now. Taking health care away from children to invest in other programs is not the right solution. If we can earmark revenue, that might make some sense. We are already hemorrhaging in some areas. We have to look at the revenue and make sure it is there.
Mara Aspinall: Businesses see this as a marathon and not a sprint. In the four states that have put this in, Georgia had a 40 percent reduction in special education within three years. It is nice to save in 15 years, but it doesn't help you and your colleagues win re-election.

We have relatively little money going in early on but we have a moral commitment that says this is something that we will find a way to do. If it takes 12 years instead of 10 years so be it. We need to build that foundation. The context we do not talk about is we are in a zero sum game. We are also in a competitive environment. This is not a business community that is just sitting around and saying I will just be here forever. We need to make sure we are keeping up with New York. There are other states taking actions. They are saying we need to pull business into our state. I am interested in protecting companies that are here. If we lose our current base, we are in even more trouble for revenues going forward. Education is the one social policy that can effect change in our generation very quickly. We have to engage the hearts and minds of the public. We have 111 legislators that have signed on to our bill. We did it by listening and data and soon we will do it with a media campaign.

Moderator Paul Reville: We are in agreement on the challenge and the question is how do we come together with hard-nosed strategies? I am grateful to the panel for their insights. Thank you for your time and attention.
Paul O'Brien: We are thinking about what is in the best interests of our children. They have to have political realities associated with them. The human capital is what makes us flow. The panel has articulated the hard-nosed facts of what we have to do, refocus and make sure we have support. Sen. Berry and Rep. Larkin have been doing yeoman's work for us. The final piece is the general public. We have been fortunate to work with Hill Holliday. They have given their creative time and we have been funded in some substantial advertising buys. To kick off the campaign that will start tonight is Mike Sheehan.

Mike Sheehan, President and CEO, Hill, Holiday, Connors, Cosmopulos, Inc.: Children don't vote and have a voice. It's important to convince the general public that this is an important issue. The concept you will view is the inner adult. The ad conveys that high quality early education makes a difference to everyone. The buy will occur over four weeks and include print and TV. It's a 30-second spot. Ads will appear in newspapers across the state. [The lights went out and the television ad was played]