Don’t educate, don’t grow

May 2, 2011

New analysis from Daniel Berger of Thomson Reuters Municipal Market Data suggests that greater levels of advanced education equals higher growth and muni bond ratings.

Put more simply, smart communities do better.

From Municipal Market Data:

Most of America’s older and generally industrial Midwest and Eastern cities have rapidly changed during the past forty years.

For example, cities such as Minneapolis and Boston have become very attractive regions for innovative high‐tech and biomedical companies due, in large part, to the high numbers of college graduates (over 40% of residents aged 25 years and older have college degrees).

This contrasts sharply with a couple of cities (Detroit and Cleveland) where the population of residents aged 25 and older are less prone to possess a college degree.

City % BA or + Moody’s S&P Fitch
Minneapolis 43.3% Aaa AAA AAA
Boston 42.9% Aaa AA+ AA+
Detroit 12.1% B1 BB BB
Cleveland 13.7% A1 AA A+

Detroit and Cleveland have suffered a long‐standing “brain drain” (although they may possess a few suburbs where the rate of higher education is high.)

It is striking to us that these cities have among the lowest ratings of the 50 largest US cities. We agree with Professor Edward Glaeser’s thesis that, “Education proved the best source of urban resurgence.”

Given the low rate of educational attainment in Cleveland you might think that the community is making an effort to revitalize education spending. Rather it seems to be pouring more capital into buildings.

From an opinion piece in Cleveland Plain Dealer:

Our civic boosters are beside themselves with optimism. They’re absolutely certain Cleveland’s on a roll. Joe Roman, head of the Greater Cleveland Partnership, said the region’s current investment in new or in-the-pipeline projects approaches $7 billion.

Spending plans already in place downtown total $1.5 billion.

Big bucks for buildings. Then the Plain Dealer piece pivots to education spending:

Before their jobs went away Jan. 1, the Cuyahoga County commissioners agreed to a three-year, $10 million investment in early childhood education.

Ed FitzGerald, the new county executive, wants to increase that commitment. And just a few weeks ago, the Gund Foundation pledged $1 million to Invest in Children. PNC Bank, which is more involved in early childhood initiatives than any other Ohio company, added another $300,000.

A report last week from the National Institute for Early Education Research said that during the last 10 years, no U.S. state slashed early education funding more than Ohio.

In 2010, state funding was enough to pay the preschool costs for 2 percent of Ohio’s eligible 4-year-olds. In Oklahoma, the state paid for 71 percent.

America certainly has a love of new buildings and infrastructure. Cuyahoga County, where Cleveland is located, raised its sales tax by a quarter of a percentage point to fund a new medical mart. Public concern groups questioned the accuracy of financial projections and the possible need to cover the medical mart debt service.

Education cannot be funded by issuing bonds. But education is the lifeblood of communities. And leads directly to economic vitality.

As economic conditions remain tough for municipalities the trade-off may be books or buildings. Analysis suggests that it’s books that give the best return.

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County Council, part of a charter government that replaced commissioners in January, is asking just how a project first envisioned as a $50 million detention center grew to a grand $189 million structure.

“The needs of the center were just totally underestimated, from what I’m finding,” said Councilwoman Sunny Simon, who chairs the justice affairs committee. “I’m not sure if it was lack of planning or just lack of understanding of what was going to be involved with getting this operational.”

Simon and her colleagues toured the center this month, gaping at a $25,000 custom-made conference table, $21,500 in staff exercise equipment and a $5,100 Viking fridge in the magistrates’ lounge.

They are now being asked to approve digital audio equipment and computer contracts, totaling $2.3 million. Each of the judges are requesting three computers, said court Administrator Marita Kavalec — one for their office, one for the bench and one for audio-visual recording.

No one’s assuming blame for the tower of costs.

The commissioners signed off on all spending up to December, but they point to a lawsuit judges filed over the East 93rd and Quincy Avenue site and a 2006 settlement that mandated the county hire a South Carolina court-planning firm and that the complex include a full-service cafeteria, among other things.  /index.ssf/2011/03/juvenile_justice_cen ter_cost_grows_as_cuyahoga_county_counci l_considers_change_orders.html

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