Beneficial Returns to Public Investment in All Levels of Education (UK Research)

| by Perry Papka, Senior Policy Director |

Recent research published by the Center for Business and Economic Research (CBER) at the University of Kentucky highlights that public investment in all levels of education – early childhood, K-12, and postsecondary - yields significant beneficial returns to both students and society.  This information provides important data supporting continued strategic investment across the spectrum of the state’s public education system.

Early Childhood – Returns $5 for every $1 invested

Cost-benefit analyses conducted by the CBER in 2009 estimated that investment by Kentucky in expanded early childhood education would yield a return of $5 in public and private benefits for every $1 of public investment. The research also noted additional benefits beyond the financial return-on-investment such as: reduced need for special education, higher rates of educational attainment, reduction in health costs, reduction in the incidence of crime, and less demand for social welfare services.

With only 50% of Kentucky's children arriving in kindergarten ready for early success (see Figure 3 below), greater effort is needed to ensure that all children are given the opportunity to succeed.  CBER’s research reinforces the fact that investments in high quality early childhood education and care programs for at-risk children is not only a solution for reducing achievement gaps and improving academic performance, but pays long-term dividends to society as a whole.  
 

Source: Prichard Committee for Academic Excellence. Progress and Next Steps for Early Childhood in Kentucky: Birth through Third Grade (January 2016)

K-12 – Kentucky Schools Perform Better than Expected Given Challenges Faced

Earlier this month, CBER released a new issue brief highlighting Kentucky’s progress in education over the last 25 years. The research shows that across twelve broad measures of educational attainment and achievement, Kentucky ranks the same or higher than 34 other states and lower than only 15 – a far cry from very near the bottom in 1990. 

Moreover, while acknowledging that work remains to reach the achievement goals Kentucky has set for students and schools, the data shows that Kentucky is one of only eight states (see map in Figure 2 below) whose academic performance – as measured by the National Assessment of Educational Progress (NAEP) – for every $1,000 in per pupil investment is better than to be expected given other obstacles students face such as poor health, poverty, disabilities or parents with low educational attainment. 

The bottom line is that Kentucky’s schools are cost-effective in providing a strong return-on-investment given significant demographic challenges facing many Kentucky communities. 

Source: Childress, Michael. Kentucky’s Educational Performance & Points of Leverage (January 2016) Center for Business and Economic Research, University of Kentucky.



Postsecondary – Higher Education has Significant Pay-Off for Individuals and the State
In October of 2015, CBER released a series of seven issue briefs highlighting the dynamic effects of educational attainment on Kentucky’s economy. Noting concern that Kentucky’s postsecondary educational attainment is lower than the national average, the research examined the effects raising attainment levels to the national average across seven key outcomes: income/earnings, employment, state income taxes, Medicaid costs and participation, health, crime, and participation in the federal SSI and SNAP programs. 

Not surprisingly, the analysis found that greater educational attainment leads not only to better employment outcomes, higher earnings and more tax revenue, but also lower crime, less chronic disease, and lower demand for public service programs. While these positive outcomes might have been expected in the state’s urban centers, the research showed similar effects to education across rural regions of the Commonwealth as well (see figure 1 below).

Source: Bollinger, Chris. Education Pays Everywhere! (September 2015) Center for Business and Economic Research, University of Kentucky.



CBER’s findings also estimate that raising Kentucky’s educational attainment level to the national average would generate $903 million annually in new tax revenue and cost savings.  Specifically, the state would realize approximately $500 million in additional income tax receipts, $200 million in Medicaid cost savings, $200 million in other healthcare cost savings, and $3 million in crime-related cost savings. 

Conclusion

Kentucky’s long-term success in continuing progress in student achievement, ensuring a dynamic, talented workforce, and developing thriving communities will be made stronger through increased investment that recognizes our educational system as a seamless web of opportunity for all citizens. The recent findings by the University of Kentucky’s Center for Business and Economic Research reinforce this notion and offer important reminders that the smart money is on public investment in a high-quality educational system – from early childhood through postsecondary – which is certain to yield significant returns to the Commonwealth of Kentucky.