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Endowment may help well-off kids most

One of the many items on the agenda for the new legislative session is Governor Parnell's proposal to establish a $400 million endowment for merit scholarships. Alaskan students will be able to use the scholarship to attend in-state universities or vocational schools. The amount a student receives will be based upon his or her high school grade point average.

I agree with the governor that improving the quality of, and access to, education at all levels is essential to the state's long-run success. But there are alternatives to merit-based scholarships that would meet our shared goals much more effectively. Studies have shown that these scholarships have at best a small effect on the decision to attend an in-state college and are inefficient, expensive entitlement programs that benefit higher- income students who would have gone to college anyway.

Whether this handful of additional in-state students are the "best and the brightest" depends upon how the scholarship program is structured, the quality of in-state universities, and the diversity of choices that students have.

In Georgia, for example, average SAT scores jumped dramatically because their universities became more selective, not because of increases in academic achievement. Since students could choose from any university in the state, including two of the nation's top public universities and some highly ranked private colleges, it is no surprise that many of the best students would stay near home.

In New Mexico, on the other hand, most of the students who were redirected to in-state institutions were academically weak and more likely to drop out before graduating. While the exact cause of this difference from Georgia is uncertain, I would not be surprised if the low grade point average requirement -- C+, similar to Alaska's GPA -- and fewer college choices both played a role.

The students least likely to receive a merit scholarship are low-income minorities. Although these programs may have a small influence on where someone goes to school, there's no evidence that they affect who attends college. Since household income is a key determinant of academic success, the benefits accrue mostly to higher-income students already planning to attend college. In Georgia, an astounding 85 percent of the scholarship expenditures were simply a cash transfer from the state to these higher-income students. Not surprisingly, there is some evidence that this has led to an increase in car purchases.

So how do we position Alaska to be competitive in the global economy 30 years from now? Let me suggest a two-prong approach.

First, the greatest returns to public investment in education occur when students are young, so invest in early childhood and K-12 education. Governor Parnell notes that an alarming 65 percent of students entering the University of Alaska need remedial training. This is simply unacceptable. It makes no sense to invest in post-secondary education unless students are prepared for it.

Second, turn the University of Alaska into a nationally recognized institution by recruiting top scholars and developing exciting new world-class programs in fields that are best studied in Alaska. Given the budget problems faced by other state universities, now is the perfect time to attract faculty from other schools. Improving quality and institutional reputation will not only encourage our best students to study at home but will also attract talented students from other states.

I am thrilled that Governor Parnell has made higher education a priority, and a lot can be accomplished with $400 million. Unfortunately, his proposed initiative, although well-intended, may turn into an expensive entitlement program for higher-income families.

James Murphy is the Rasmuson Chair of Economics at the University of Alaska Anchorage.

By JAMES MURPHY, Ph.D.

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