252 PRINCIPLES OF ECONOMICS II

The Kalamazoo Promise

The Kalamazoo Promise is a privately funded college tuition scholarship providing graduates of the Kalamazoo Public Schools (KPS) system with up to 100% tuition scholarships at any public college, university or community college in the state of Michigan or any private, nonprofit college that is a member of the Michigan College Alliance. The scholarship program is designed to provide maximum social (external) benefits to a wide range of parties in addition to the direct benefit provided to KPS graduating seniors. In order to qualify, a student:

1. Must graduate from one of the three KPS public high schools – there is no minimum qualifying grade point other than that required to earn a diploma.
2. Must have attended KPS schools for AT LEAST ALL 4 YEARS OF HIGH SCHOOL.
3. Must be a RESIDENT of the KPS school district while attending Kalamazoo Public schools.
4. Must attend a public college, university or community college IN THE STATE of MICHIGAN, or one of the fifteen private, non-profit colleges that are members of the Michigan Colleges Alliance. MCA members have promised to cover the difference between their respective tuition and fee costs and the costs of attending a public Michigan college or university.

The Promise provides money for payment of tuition and mandatory fees at the participating institutions of higher education for 130 credit hours or through completion of a 4-year degree, whichever occurs first. The % of tuition and fees covered ranges from 65% for those resident students who attend only the four years of high school up to 100% for resident students who attend Kalamazoo Public Schools for their entire K-12 education.

The Kalamazoo Promise was designed as a dual-purpose program. It is not only a scholarship program but also an economic stimulus program. The Promise was clearly designed to maximize economic benefits that extend well beyond the direct benefits to recipient students and their respective families. External beneficiaries include a wide range of individuals and institutions both local and statewide. The donors are anonymous but are likely to also be indirect beneficiaries of the program.

Your assignment is to identify (1) TEN of the potential beneficiaries of the program OTHER THAN KPS STUDENTS AND THEIR RESPECTIVE FAMILIES, (2) identify HOW the Promise benefits EACH one of those potential beneficiaries in the short run and the long run, and (3) discuss HOW the Promise BENEFITS THE ECONOMIES of Kalamazoo and the state of Michigan in the short- and long run. Including KPS graduates and their families, there are at least FOURTEEN (14) specific individual, categorical and institutional beneficiaries or groups of beneficiaries who gain directly or indirectly from the Promise. You will receive 25 extra points if you correctly identify at least 14 beneficiaries. Naming multiple recipients of one benefit (e.g., if retail establishments were one class of beneficiaries, simply naming 14 different restaurants in Kalamazoo) WILL NOT qualify!

Finish your paper with a discussion of what factors you think may have prompted the anonymous donors to create the scholarship program.

While the Kalamazoo Promise is unquestionably a significant benefit to Kalamazoo Public Schools students and their respective families, the benefits that accrue to third parties are at least, if not more, significant in their economic impact. In order to identify those external third parties, you need to think through how the Promise affects such microeconomic phenomena as demand and supply for specific private and public goods and services, substitutes and complements, prices and production costs, revenues, taxes, etc.

You can find additional information about the Kalamazoo Promise by clicking on the link provided in the folder for this assignment. It is not, however, necessary to do so, if you think through all the Rubik’s cube aspects of the program, which was clearly designed with extensive input from economists.

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