Published Online: April 15, 1987

Economic 'Yardstick' of States Includes School Investments

A newly developed "yardstick'' for measuring states' economic health and vitality includes as a key indicator their investment in public education and demonstrated commitment to strengthening it.

"Long-term investment in education'' is a major component of a strong state economy, according to "Making the Grade: The Development Report Card for the States,'' which was released last month by the Corporation for Enterprise Development.

The corporation, a national economic-development research and consulting organization, developed the yardstick for assessing a state's economic health because traditional measures focus on an antiquated definition of what constitutes a good "business climate,'' according to the report.

Under traditional business-climate indexes, the report notes, states score high if they have low taxes and wage levels, minimal or no unionization, leniently enforced regulations, and low public spending.

"Where the old formula was obsessed with cutting wages, benefits, regulations, taxes, and unions,'' the report states, "the new formula emphasizes investment--in education, training, infrastructure, technology, amenities, and other sources of development capacity--to build international competitiveness.''

In short, the report states, "firms are locating where people want to live and businesses are being born where resources exist to support them.''

The report, the first in what the corporation says will be an annual series, examines 78 factors important to a state's economic health and development and grades each state on four indexes.

The indexes measure "performance,'' how well the state's economy is performing; "business vitality,'' how vital the businesses in the state are; "capacity,'' the state's ability to expand growth and opportunity; and "policies,'' steps the state has taken to foster business growth and economic opportunity.

The report also grades states in several subcategories within the larger indexes.

A state's level of investment in education and other education-related considerations are important factors in determining the grade it receives on the "human resource'' subindex, the "driving force of the overall capacity ranking,'' according to the report.

Education factors used in computing a state's human-resource grade include high-school graduation rate, per-pupil expenditure, public-school teacher-pupil ratio, and percentage of the adult population with a college education.

On the basis of these and other factors, the following states were given an A grade in human-resource capacity: California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, New York, Rhode Island, Vermont, and Wisconsin.

The states that received an F grade were Alabama, Arkansas, Kentucky, Louisiana, Mississippi, Nevada, South Carolina, South Dakota, Tennessee, and West Virginia.

Improvement Efforts Counted

Efforts by states to strengthen their public-education systems were included in the policy-index grade. This index is different from the others in that it simply counts the number of state programs deemed to encourage and promote development in seven predetermined areas. States are graded based on that count.

In the area of education, the index checks which states in 1985 had in place high-school graduation standards, graduation testing, career ladders for teachers, teacher testing, and computer-literacy programs.

One state, Louisiana, received checks in four out of the five categories, but received a D grade on the overall policy section. Three states--Florida, Hawaii, and Texas--received checks in three of the five categories. The majority of the states received two checks. Iowa and Rhode Island received none.

Sponsors of the development report card include the American Federation of Teachers, the Atlantic Richfield Foundation, the James C. Penny Foundation, the Service Employees International Union, and the Tobacco Institute Labor Management Committee.

Copies of the 122-page report are available for $20 each from the Corporation for Enterprise Development, Suite 1401, 1725 K Street, N.W., Washington, D.C. 20006.

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