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participants' responses to this interview.
of Meeting with Art Rolnick
Civic Caucus, 8301
Creekside Circle, Bloomington, MN 55437
November 19, 2010
retired senior vice
president, Federal Reserve Bank of
currently senior fellow, Humphrey Institute,
Verne Johnson (Chair, phone); David Broden, Janis Clay, Paul Gilje, Jim
Kemper, Ted Kolderie,
Jim Olson (phone), Clarence Shallbetter, Bob White
of Rolnick's comments:
Humphrey Institute Senior Fellow and former Federal Reserve economist
Art Rolnick describes the process of his becoming involved in early
childhood education, including developing the economic case for investment
in quality early childhood programs, and designing a market-based system
that provides scholarships to low-income families to use at quality
Early Learning Foundation (MELF) was formed to support this system, and
has been supporting pilot efforts of this market-system since 2005. MELF
provides families with the means, information, and mentoring to choose
quality programs. The system has broad appeal, and has garnered interest
elsewhere in the country and in Washington, D.C. MELF has plans to expand
pilot efforts and bring it to scale. Sustainable forms of funding and
evaluation are being examined.
Welcome and introductions-Art
Rolnick is a senior fellow at the Humphrey Institute, and was senior vice
president and director of research at the Federal Reserve Bank of
Minneapolis from 1985 to 2010. As a top official of the Federal Reserve
Bank, Rolnick regularly attended meetings of the Federal Open Market
Committee-the Federal Reserve's principal body responsible for
establishing national money and credit policies. He has written
extensively on the 'too big to fail' problem, and the economics of early
He has been a visiting
and associate professor at various colleges and universities, and serves
on nonprofit boards including the Minnesota Council on Economic Education,
Greater Twin Cities United Way, Citizens League of Minnesota and Ready 4
K. He was also on the
StarTribune's Board of
Economists, and was a member of Minnesota's Council of Economic Advisors.
He was named 2005 Minnesotan of the Year by
Minnesota Monthly magazine.
A native of
Rolnick has a bachelor's degree in mathematics and a master's degree in
economics from Wayne State University, Detroit, and a doctorate in
economics from the
Comments and discussion-During
Rolnick's visit with the Civic Caucus, the following points were raised:
Art has been active
for some years in public affairs and became involved with early childhood
issues, in particular, about ten years ago. The Civic Caucus is interested
both in an update on his work in early childhood, as well as his views on
actions needed for the future expansion of state jobs.
"I'd like to link the
two," Rolnick opened, "because addressing early childhood development will
be the greatest economic development tool we could have."
economic sense to be involved in early
It's a little bit
unusual for the Federal Reserve to be involved in early childhood, Rolnick
said, noting that his specialty is pre-civil war banking (when states as
well as banks issued their own currency). A few years ago he became
involved with a small group that would gather and invite a CEO to join and
talk about a passion. They brought in Todd Otis of Ready4K, and others, to
talk about early childhood.
"They were making a
moral argument that I agreed with," Rolnick said, "but I told them that if
you're going to move this in policy you've got to have the economic
argument as well." They agreed, and soon came back with a request for
Rolnick to become involved and help in making the case. "So I did."
science supports starting early
"Everything needs to
be rooted in science," Rolnick said, so far as it can be. "When it comes
to understanding the importance of reaching young people as early as
possible-pre-natal-the science is pretty clear." This has significance for
figuring an economic impact.
Rolnick described that
in doing his initial research various studies led him to recognize the
significance of early childhood development; this was particularly
revealing in a case of brain imaging performed on Romanian orphans. The
most poignant finding of that report was that orphans that had been
starved of human attention had a brain one third the size of a normal,
He explained that his
mentor on the topic is Jack Shonkoff, who edited a book titled 'From
Neurons to Neighborhoods' (http://tinyurl.com/243rgkr)
and, "says the debate between 'nature and nurture' is over." Brain
development in early childhood is essential, Rolnick said, and it is all
based on experience. If a child is neglected or abused, or if the
communication is all one-way command interactions, then the rapid neuron
connections made in the early years of development are stunted.
The studies that Rob
Grunewald, Rolnick's colleague at the Federal Reserve, looked at-"the
classics"-began in Michigan in the early 60's. One study took 123 at-risk
families, and divided them into two groups. The first group received high
quality early education options that involved focus and master-level
teachers. This was contrasted with a control group. "What they did was
invest $10,000 in today's dollars in child care programming-quality
programming-and found that the kids that were in the program were doing
much better than those in the control group."
Rolnick and Grunewald
then did a study, projecting out dollars that could be saved by placing
figures on various social costs, including dropouts and incarceration.
They sought to determine how much money was saved over time in real terms,
and so pegged the projected savings to the growth of the stock market-5.8
percent over the period of the study.
They found an average
16 percent annual inflation-adjusted return, with rates ranging from 8-20
percent. And he suspects the benefits reach much farther: "We found out
later that the parent income also went up for those whose children were in
quality care, and now we are just starting to get data on the children of
See a report here:
"We challenged the
academic community to find a better investment for the public funds, and
have received no response."
Minnesota Early Learning Foundation (MELF)
After some time
working on the research and after beginning to design the outlines of a
sound market system for early childhood, Rolnick met Warren
Staley, CEO of Cargill, who
was instrumental in bringing together a distinguished-but active-board
that raised $20 million to put these ideas into practice. These funds were
used to create the Minnesota Early Learning Foundation.
As an organization
MELF provides three key components:
Provides information on quality of early learning programs through the
'Parent-Aware' rating system (ratings are voluntary and 'opt-in'; see: (http://tinyurl.com/27etyex)
The means to utilize
scholarships to be used at programs rated with three or four stars;
gives parents list of programs and they pick.
Outsources mentoring services to an established seven-county
organization called Metro Alliance that forms relationships with
families to identify their needs and explain options.
the model of the MELF system to practice
To bring this model to
the real world Rolnick outlined five challenges that must be met:
Start earlier than
3-4 years old
Focus on parents
Focus on at-risk
The question facing
policy, Rolnick argued, is to determine how to set up a system that will
meet all of these criteria at once. As two economists, Rolnick said, he
and Grunewald focused on markets. They looked at higher education and
thought about the need to empower 'consumers'-which brought them to the
idea of scholarships for programs.
They then considered
the question of how to reach children earlier than the program age of 3-4
years. This led to the idea of "scholarships-plus," or getting trained
mentors to reach out to families at-risk by going into homes and beginning
to work with them earlier in life-pre-natally if possible.
After raising private
funds to finance the Parent Aware quality rating system and the
scholarships, MELF decided to do a pilot in St. Paul. "We publicized that
if you live in Frogtown and your income is 125 percent of the poverty
level, then congratulations, you have a scholarship." It doesn't matter if
a family moves or wins the lottery, Rolnick said; the scholarship is
theirs. Families are provided a map with programs in their area and the
program mentors assist families in finding programs that fit.
replicable market-based system, not particular programs
The motivation behind
creating MELF was to construct a replicable system, not to favor
particular programs. If the system is sound, with the proper information,
means, and incentives for parents and providers, the quality and supply
will be there to meet demand.
It is essential to be
able to bring any good system to scale, Rolnick said. The Harlem
Children's Zone is a remarkable success, "but I'm not Geoffrey
Canada-don't know how to be Geoffrey Canada." Instead, a system could be
constructed that rewards people like Canada that create superior programs
by providing the means for families to choose them and pay them.
"Scholarships are very easy to bring to scale," Rolnick said, "and the
other components of the system (ratings, mentoring) are straight forward."
everything," Rolnick said-there is no one size that fits all. And he
emphasized: MELF is a system that rewards quality-rated programs by
providing families with scholarships to attend those programs. MELF and
the Parent Aware rating system do not, themselves, promote any particular
program models over others.
"We customize the
experience through mentors, and by not being program-specific." Instead
the scholarships may be applied to any 3- or 4-rated programs anywhere,
and the system is very flexible-there many different models with different
pedagogies, and from faith-based to community based.
"I believe the more
you can engage parents, the better you will do," Rolnick said, and that "A
sound system will see more diversity in educational approaches.
will be observable and it will be easy to determine if the system is
"Within six months we
will find out how successful our program is," Rolnick asserted.
has a school readiness assessment; in St. Paul 50 percent of students
don't pass. "We expect that all of our scholarship children will pass. You
will know if we succeed or if we fail." MELF will be doing longitudinal
studies out of the Humphrey Institute.
Rolnick said that he
could tell already, anecdotally, that progress is being made. The quality
of programs is rising, good program providers are coming in to new
neighborhoods, and testimonies are coming in. He told a story of a mother
who returned from service in Iraq, and was struggling to raise two young
children herself-not doing well. Her minister suggested she might qualify
for MELF scholarships for her children, and she did. Her children entered
high quality programs and the results have been remarkable. "She showed me
drawings done by the children before and during program; you can see the
colors change over time until they grew vibrant, and the imagery evolve."
aspects of the program won't be captured only by the children's
performance. Rolnick described the importance of reducing the stress on a
family, and the effect that may have on improving health for the parents
and children, and helping the parent to secure work.
Even so results must
be observable, Rolnick argued. "Non-profit organizations are increasingly
focusing on outputs, not just inputs-measureable outputs." Steve
Rothschild does this with his Twin Cities RISE program, and has been
making a compelling economic argument. (See notes from his February
discussion with the Civic Caucus here:
publicity, word of mouth, and existing networks to identify
Metro Alliance has
working relationships with communities and families. They form bonds with
the families, helping to connect them to existing social services, even
making sure members of the family are taking their medicine properly. This
positions them well to contract with MELF to help explain the scholarships
and options available to families for early childhood programs, as well.
"The mentors need to
be well trained," Rolnick noted. For the most at-risk families the mentors
are particularly important. But they have to be qualified-they need to
have medical and educational skills. "This takes some heavy lifting, but
is not that expensive. It's about $3,000 per year per family. When you tie
that to the long-term impact, it is a small amount on the front-end" and
is built in to the cost of the program.
He made sure to
emphasize that mentors are different from caseworkers: "It's a different
frame of mind. Some critics say this is the government coming in and
telling you what to do. No, the parents make all decisions. Others wonder
if the parents aren't so dysfunctional that they won't actually use these
scholarships. That's just not true-with the help of these mentors, all
healthier conditions for families
"People say we need to
change the culture of low-income communities. I don't know how to change
the culture-but I do know if you empower parents then their outlook
changes, behavior changes, and the students' experience changes."
Fathers are largely
absent, a participant observed-and distant from the family. Here too,
Rolnick said, he is not sure how to address the problem directly other
than the mentors' having some success incorporating the fathers as they
come to know the family. "But we do know if they have the mom and baby
bonding right, early on, we can have some very positive long-term
It is especially
important to relieve the stress in the family, so if the father is abusive
that needs to be addressed. Or, if bringing the father back into the
family helps to relieve the stress then that can be helpful as well. The
mentor is best positioned to assess this, but has a limited capacity to
affect such change.
supply of programs has been responding to demand
To a question from a
participant, Rolnick said that as scholarships have become available both
the quality and quantity of early childhood programs has responded. And,
"I'm going to argue the market will continue to respond."
Shortly after they
announced the deployment of scholarships in the Frogtown area of St. Paul
New Horizons broke ground on a new facility. At the same time St. Paul
Head Start and Montessori expanded-and then programs near the area began
improving in quality. Both the quality of existing programs improved and
new, high-quality programs were introduced.
alternative ways to finance the program as it goes to scale
At present the
ratings, scholarships, and mentors are financed by private donations that
were raised at its inception and set to sunset in 2010. MELF is looking at
different ways to fund the program. One option is tax credits for
families, though an alternative-and Rolnick's preference-would be to
create a $1.8 billion endowed fund that could finance the scholarships and
ratings system for
There are three potential sources for these funds: One-third by
redirecting a land endowment that presently goes to K-12; one-third
through private sources; and one-third a federal match.
A participant wondered
if there aren't more options still for creating supply, and securing
financing-encouraging the creation of programs for example that are built
off partnerships with districts, or the chartering platform for creating
public schools. This could tap into existing public support for education,
including county aid for childcare.
system has broad appeal, and interest
"This model has appeal
beyond the Twin Cities," Rolnick noted-including the White House. I ended
up with a two hour meeting with Rahm Emanuel on this topic. I can tell the
White House: I've got a 'shovel-ready' stimulus project."
"I have been around
the country talking about this, and am working with a number of governors
on the issue. There is interest in New Orleans, and in Chicago.
"We think we have
something that works. If this country could see that Minnesota is making
this work, we could have a major impact."
employment and economic stimulus plan
Turning to the state
legislative priorities, a participant asked Rolnick what strategies he
feels the legislature should pursue this session?
"You can't do much in
the short run," Rolnick said. "Look what happened with the Federal
government with the stimulus-it's very difficult to turn an economy that
needs to make fundamental changes in short order.
"This (early childhood
education) is the most effective employment and economic stimulus plan.
You want to see new buildings and new employment-go look at New Horizons
are buildings, these are jobs. But more importantly it is the long-term
return that warrants this investment."
So far it
has been a challenging 'sell' to the legislature
"Run your thinking
back over past legislative efforts," a participant asked-what have been
the results of efforts at securing money for early childhood?
There have been
efforts at creating a national movement, Rolnick observed-but politicians
have become frustrated because there is lack of focus. 'You say we're at
A, and should go to B-but how do you go to B?' The proponents haven't
brought a strategy, and the politicians have been unable to translate it.
There was no model-no answer to the question, 'how?'
literature drove us to this market-based approach, but we had to go to
So far the public
financing has been elusive, and Rolnick argued it is a problem of
priorities: stadiums get it; K-12 gets it. If any money becomes available,
it gets absorbed, and certainly any new money is scarce. "These kids don't
vote; and their parents don't vote; and the problem is kind of invisible.
I'm the economist here, not the political scientist. Relationships are
important though-we can build support around this."
"But the question is
the strategy," a participant noted again. "Yes," he agreed, "and MELF is
the strategy. I'm trying to make St. Paul as visible as the Vikings. Make
the point that we know how this works; make the argument and make it as
visible as you can; make it concrete, and be persistent."
Another option for
financing could be to open up single-purpose charter authorizers to
request innovative proposals for programs, and allow schools to work down
to age 3, using the open and standing financing of public schooling to
provide resources to programs. There may be a way to connect this to the
sliding scale of the county's early childhood financing program.
strategy for staged growth
"People say this kind
of choice-based system hasn't been tried before," Rolnick said; "I say it
has. I live out in Plymouth where there are young families with countless
choices for early childhood. They have money and information."
The next step is to
develop new pilots. "The Heinz people told me: Start small, replicate." So
the plan is to begin launching pilots on the north side of
and the White Earth Indian reservation. Rolnick is also in conversations
Chicago, and New Orleans to do small-scale efforts there. He is building
networks of civic support now.
Once the pilots are
established, Rolnick said, "when you're ready to go to scale it's not
hard. You need a board, and scholarships. You can outsource the mentor
component. We've got the business model. I tell people: I want to see that
you can connect with families, and if so, it will work."
As a practical matter
it helps to start a new pilot in a region that is adjacent to another
region-probably wealthier-that already has quality programs running. It is
easier for providers to migrate over to the underserved area.
To wrap up, the
chairman thanked Mr. Rolnick for his time, and for the conversation. He
agreed that the discussion was valuable, complimenting the Civic Caucus
model -"people listen to you; I want to say that. They have asked about
you, and I said 'I'm going to speak to them!'" The same holds for other
organizations as well-the state has an active civic life.