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POLICY BRIEF: Ensure School Readiness with an Endowment

In Minnesota, there is a clear path to fully funding state-wide early education
July 20, 2015

KEY POLICY INSIGHT: Revenue from Minnesota’s School Trust Lands Fund has already been earmarked for education. A permanent commitment to put these funds toward improving early learning would bypass political battles over budgets and promise a reliable, annual source of funding for the state to ensure all of its 5 year-olds start kindergarten ready to succeed.

Early Learning Adds Up

Study after study—and trial after trial—prove that early childhood education pays off. Well-focused investments in early childhood development yield high public, as well as private, returns. Early intervention not only improves children’s chances of success in elementary school, but in high school and well into adulthood.

Widely recognized results include better working public schools, more educated workers, less crime and fewer expenses generated from remedial education, social services, unemployment, health care, and law enforcement. In the short run and long run, society saves both money and sorrow. Indeed, studies show that the annual rate of return on investing in early learning for our most vulnerable children can be as high as 16 percent.

Yet in Minnesota, almost half of all children are not prepared to start kindergarten. Many of these children also start life with the disadvantage of parents who are low-income and who often have not finished school themselves. But experience shows that these youngsters have the ability to succeed—if they’re given the chance.

The Price Tag

More so than many other issues, education as an economic development tool has engendered support from both sides of the aisle. Indeed, in the most recent legislative session, Minnesota awarded an additional $150 million for targeted early learning initiatives over the next biennium. Nevertheless, each new budget deal lawmakers strike risks derailing sufficient and consistent funding for children at their most formative stage. To avoid going off the tracks, we are proposing an early education endowment.

An endowment of roughly $1.5 billion would provide the funds needed to supplement Minnesota’s current early childhood education programs and provide comprehensive programming across the state. An endowment of this size could produce approximately $105 million in annual earnings to be invested in early learning initiatives.

Making the Sale

Selling is not only about having a good product. It’s about convincing the buyer that the price is affordable. Finding $1.5 billion to pay for at-risk children’s education years before they see the inside of a K-12 classroom presents a significant hurdle.

Fortunately, there is a strategy that could leverage existing funds—eventually to reach $150 million a year. These are funds that would help provide flexible early learning scholarships to the 20,000 children living in poverty in Minnesota. (The Minnesota Early Learning Foundation—piloting an investment of $20 million in private funds—already has shown how successful early learning scholarships can be when used in high-quality programs. See the full description of this program below.)

And the best part: The plan involves no increase in taxes or major shifts in public school spending. The tactic would be as close to “free money” as it gets in education. A pot of money, known as the School Trust Lands Fund – likely to grow substantially in the next several years – could be the key. In the 19th century, the federal government gave Minnesota thousands of acres earmarked for a special purpose. Revenues from use of the land were to be used for education.

The land itself, concentrated in the northeastern corner of the state, already generates millions annually to finance schools. The money comes from leases for a wide variety of land uses, from timber and farming to recreation and mining. This cash trove soon is likely to be worth millions more per year as there are expectations that the value of this land may increase dramatically in the coming years. This stream of cash, along with federal and private grants, could be combined to create an endowment of $1.5 billion to $2 billion to be used exclusively for children from birth to 5 years old to prepare them for K-12 classes.

Built to Last

An endowment has many virtues over raising taxes. Taxes raised one year could be cut the next. An endowment promises a steady source of money, a permanent commitment to lend a hand to children most in need, freeing these programs from the perpetual budget battles that are part of the state political process. A permanent commitment also provides the financial incentive for early education providers, both private and public, to invest in a critical need: more early learning infrastructure.

Finally, a permanent commitment, ensuring that all Minnesota children will have the opportunity to succeed and become productive workers, sends a message to the business community that our state will continue to have one of the most qualified work forces in the country. The state of Minnesota could not make a better economic development investment.

Spend Now to Save Later

To be sure, K-12 administrators, school boards and teachers may wish to lay claim exclusively to every dollar generated from the School Trust Lands Fund. After all, their schools have been beneficiaries of the fund for more than a century. But traditional schools would also be the beneficiaries of expanding education to younger children.

Early childhood education produces demonstrated improvements in student performance—and substantial savings. Fewer children would need special education, fewer students would need to be retained a grade, fewer children would have behavior problems, and our teachers would have more of their valuable time devoted to teaching.

It follows that improving the lot of children who are not prepared would also reward students who are ready. When a handful of children misbehave or can’t keep up with lessons, the attention of everyone in the classroom is diverted and momentum is lost. In other words, investing the revenue from the School Trust Lands Fund in early learning scholarships would generate savings to K-12 that more than offset the initial loss of school funding.

The need to help children from families living in poverty is urgent–both for their futures and the future of Minnesota.

Minnesota Early Learning Foundation's Pilot Model

Early Education Scholarships

In 2005, Minnesota business and nonprofit leaders formed the Minnesota Early Learning Foundation (MELF) and raised $20 million in private funding to learn more about how to improve early education quality. A central reform that proved especially promising was a scholarship model tested in Saint Paul. Scholarships were designed to help low-income children access high quality early care and education. But the scholarships were different than traditional government childcare programs in fundamental ways.

  • The scholarships were streamlined, involving less paperwork for parents and providers.
  • They were portable. Families could take the scholarship from provider to provider without losing eligibility.
  • They were empowering. Families viewed the funds as a scholarship for early learning, not a welfare program.
  • Finally, they were focused on high quality early learning. Unlike traditional government programs, the scholarships could only be used with providers who could demonstrate that they offered high quality early education.

Parent Aware Ratings

Through a rigorous evaluation of the pilots, MELF found a quality rating and improvement system (QRIS) to be an especially effective and efficient reform tool. In the pilots, the Parent Aware Ratings were a simple-to-use one- to four-star rating system for helping parents find the early care and education providers in their community who were using the best practices for preparing kids for kindergarten. While 36 other states use QRIS, the Parent Aware pilot represented the most market-based approach ever used in the nation.

Pilot Results

  • Low-income kids moved into proven quality. The coupling of the Parent Aware Ratings and the scholarship program greatly increased low-income kids’ access to high-quality programs. Prior to receiving a scholarship, the majority of children were being cared for in unlicensed care (57%). After receiving a scholarship, all (100%) children were attending a program that could demonstrate that they offered high quality early education.
  • Ratings convinced providers to improve quality. The Ratings and the rewards associated with them successfully convinced providers to improve their early education quality.
  • Low-income kids made greater gains. In terms of language and literacy measures, low-income children in rated programs made greater progress than the full sample of children.
  • Kids in quality programs make strong gains. Children in child care settings with high Parent Aware Ratings showed significant gains in kindergarten readiness measures, such as expressive and receptive vocabulary, phonological awareness, print knowledge and social competence.



Grunewald, Rob, and Arthur J. Rolnick. 2003. Early Childhood Development: Economic Development with a High Public Return. Fedgazette.17 (4): 6-12.

Grunewald, Rob, and Arthur J. Rolnick. 2007. The Economic Benefits of Ensuring Good Early childhood Development are Clear. Now it’s Time to Design and Implement a System to Do It. Education Week’s Quality Counts.

Grunewald, Rob, and Arthur J. Rolnick. 2003. Early Childhood Development: Economic Development with a High Public Return. Fedgazette. 17 (4): 6-12.

Heckman, James J. 2006. Skill Formation and the Economics of Investing in Disadvantaged Children. Science.1900-1902.

School Trust Lands. Retrieved from


Policy briefs from the Heller-Hurwicz Economics Institute are intended to convey policy relevant research done by researchers associated with the Institute and do not represent the position of the Institute.