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These objectives are met by programs designed and proposed by non-profit organizations, federal, state and local agencies, colleges and universities, and Indian Tribes. Two-thirds of AmeriCorps grants funds are administered through State Commissions on National and Community Service; half of this amount is allocated to the individual states on a population-based formula, the other half is allocated on a competitive peer review basis. The remaining one-third of the grant funds is allocated at the national level to national nonprofit organizations, programs operating across state lines, and programs supervised by federal agencies. In fiscal year 1995 $250 million was budgeted for AmeriCorps grants. Total budgeted expense of the AmeriCorps grants program in FY 1995 is approximately $395 million when the costs of post-service education awards are included.

AmeriCorps grants programs operate with a combination of federal and other funds. Funded programs must raise 25% of the operating expenses and 15% of the members' living allowances from other sources.' Full-time members serve for 1,700 hours per year; part-time members contribute 900 hours per year. There is a two year maximum period for full-time participants. If members successfully complete their service obligations they receive education vouchers worth $4,725 per year of service ($2,363 for part-time) that can be used to pay off existing qualified student loans or to finance additional post-secondary education. Vouchers must be used within seven years.

Benefits from these programs accrue to society in three ways. First, there is a direct benefit brought about by the value of production that AmeriCorps members generate. For example, cleaning up and repairing housing to donate to the aged or the poor, as Habitat for Humanity does, clearly benefits society. Restoring a park, constructing a bicycle path, or planting trees are activities that municipal governments regularly perform and can be evaluated in the same manner that we evaluate any government activity. Similarly, teaching children mathematics, reading, and computer skills are activities that have been performed in the past in both public and private sectors.

Second, there is the benefit to individual participants. AmeriCorps members benefit in several ways. First, there is the payment for the service activity, which is a benefit to the AmeriCorps member as it would be to any worker. In addition to the living allowance, which we term wages, health insurance may be provided, and subject to a means test, child care can also be provided. Over and above these immediate rewards, there is the reward of having contributed time and effort to a worthy cause. This return is conceptually the same as the return that one gets from charitable giving. In addition, there are returns that accrue to the Corps member in the future. The benefits of further education are perhaps the most obvious, but there are other, less tangible, benefits such as turning a life around, or of developing leadership potential, that accrue also.

Finally, there are benefits which, because of incomplete markets or "externalities" in their production, are not completely captured by AmeriCorps members. Examples of these benefits include the value of reducing racial tensions in a community, or generating greater respect for, and cooperation with, law enforcement agencies. A distinguishing feature of such benefits is that they are difficult to measure even where there is agreement on their presence.

Evaluating the benefits of all programs funded by AmeriCorps would be a daunting task. Instead, we have focused on three programs -- AmeriCorps for Math and Literacy, Project First, and the East Bay Conservation Corps. The purpose of this study, however, is certainly not to compare these programs with each other in terms of measurable benefits, costs or otherwise. Rather we view them together, for in combination the three programs illustrate the range of activities that AmeriCorps members perform. As noted above, the central policy question addressed by this study is whether the

'New projects are selected by peer review; existing projects are reviewed for continued funding by staff.

'Compensation above minimum wage level can be, and has been, paid to some participants. In this case payments in excess of 85% of the minimum wage come from non-federal contributions.

AmeriCorps program, as represented by these three particular projects, produces measurable benefits to society in excess of federal program costs. Thus, the issue is whether the exemplar projects have measurable benefit-cost ratios in excess of one; it is not to compare the calculated ratios to each other, and, in any event, that simple comparison would be misleading.'

Each of these programs has a distinct focus, of which we provide the following summary.'

AmeriCorps for Math and Literacy

This program is a cooperative effort of The Charles A. Dana Center for Mathematics and Science Education at the University of Texas at Austin and of Reading Recovery, a program headquartered at The Ohio State University. Substantial funding from The Charles A. Dana Foundation of New York, as well as contributions by the universities, supplement funds provided by AmeriCorps. The program deploys skilled AmeriCorps members (mostly college students, majoring in mathematics or science, working part-time) into inner city and rural elementary schools. Forty AmeriCorps members were planned for the initial year, two to a classroom for a total of twenty at sites in Austin, Texas and in Columbus, Ohio. After receiving training by the professional staff of Reading Recovery and the Dana Center, AmeriCorps members work with kindergarten through second grade "at risk" children to strengthen their reading, writing, and math skills. A short economic characterization of this program is that it is about technology transfer. Methods of improving human capital acquisition by at-risk youth are transmitted first to the AmeriCorps members and, through them, to the children. In addition, each participating school receives a donated technology center that includes a computer and printer for desktop publishing, a contribution of $800 in books and other materials for each classroom that is staffed with AmeriCorps members.

Project First

Providing access for public school students to computers and other modern technologies is the main purpose of Project First. This is a multiple site program involving the Public Education Fund Network, the International Business Machines (IBM) Corporation, and 47 schools located in three cities Atlanta, Charlotte, and New York. AmeriCorps teams consist of recent college graduates with technology backgrounds, who are called Technology Coordinators, and retired technology experts from IBM, who are used to supervise the Technology Coordinators. Coordinators repair and maintain technological equipment, primarily but not exclusively computers and peripherals, and assist school personnel in developing skills in using the equipment. A total of 40 full-time and 5 part-time positions were allocated for the first year. In addition to the contributions of the AmeriCorps members, IBM has donated many personal computers for use in schools and retired IBM employees have donated time to train and supervise AmeriCorps members.

East Bay Conservation Corps

East Bay Conservation Corps (EBCC) AmeriCorps programs are diverse, ranging from planting trees and repairing dams, to counseling teenagers and setting up teen centers, to promoting Health Through Art campaigns, immunization services, and providing nutritional counseling to the homeless." At full staffing the EBCC provides 46 full-time and 1 part-time position to cover Health and Human Needs in five teams; 34 full-time positions in five teams to cover Environmental Needs; and 38 full-time and

'By analogy to statistical terminology, we are essentially investigating whether the three computed benefit-cost ratios are significantly different from (greater than) one, but not whether they are significantly different from each other.

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More complete descriptions of the projects provided by the project managers are included in Appendix 1.

10 Loesch-Griffin (1993, 1994) describes many of these programs; see also Appendix I.

9 part-time positions to cover Educational Needs. Part of this program, involving 34.5 full time equivalent ("FTE") positions, is comparable to AmeriCorps for Math and Literacy in that the benefits to society occur through education; the remainder of the program is similar to the services provided by non-profit organizations and municipalities.

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We stated earlier that benefits accrue both to society as a whole and to the individual AmeriCorps members as a result of the AmeriCorps program, and that for the three programs described above we will ascribe both benefits and costs. Because these programs have been in operation for so short a time it is not possible to measure the benefits that actually accrued under the existing programs." Instead, we estimate benefits that could reasonably be expected to accrue based upon the activities of the AmeriCorps programs. Some of these benefits are conceptually easy to measure, and adequate data exists to do so; other benefits are conceptually easy to measure, but no adequate database exists upon which to base an analysis. And there are benefits for which measurement cannot be attempted for lack of a conceptual model. In this study, we provide estimates only of benefits that are measurable and upon which there exists agreement in the research community about how to evaluate these benefits. We start first with benefits to the participants.

Benefits to AmeriCorps Members

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We calculate benefits in terms of benefits received per full-time equivalent (FTE) AmeriCorps member per year.12 We do so because it is a convenient benchmark, and also because we frequently have to use cost estimates based on budgeted expenditures rather than actual expenditures. Stating costs and benefits on a FTE basis allows us to ignore the issue of whether a particular program was able to fill its positions. Benefits received by each AmeriCorps member consist of:

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(2)

fringe benefits that can in some cases include health care and child
care;

(3)

a charitable contribution value due to performing public service; and,

(4)

the value of future education benefits received through the education
voucher system.

The first two benefits are standard. The third benefit follows from the theory of equalizing wage differentials." A job involving national service is a tied-sale. It both pays a wage, Ws, to the worker and "sells" her a work-related benefit, CNs. If that benefit is a "good" the wage will be less; if it is a "bad" it will be more. Individuals rationally choose to work in national service if:

"The California Conservation Corps, which was evaluated by Public/Private Ventures (Branch et al., 1987; Wolf et al., 1987), is not comparable with AmeriCorps programs in part because it focused on residential, outdoor work as a method for turning lives around. The programs we analyze here are more human capital oriented.

12 All dollar measures are calculated in constant ($1992) dollars, except where explicitly noted to the contrary, and converted to $1995 through an inflation adjustment described infra at n.23.

"See Sherwin Rosen, "The Theory of Equalizing Differences," Chapter 13 in O. Ashenfelter and R. Layard, eds., Handbook of Labor Economics, North-Holland: Amsterdam, 1986, p.641-92.

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where W is the wage paid on the average job available to the worker. Thus the value to the worker of the non-monetary aspect of national service is

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The compensating differential for this work is measured (at the minimum) by the wage differential between national service work and pay on the jobs that AmeriCorps members could have obtained. We term this benefit "Citizenship" and measure its value by the wage differential between average jobs for 18-25 year olds and the earnings of individuals who were employed in the following public service industries: (1) Job training and vocational rehabilitation services (SIC 861), (2) residential care facilities, without nursing (SIC 870), and (3) religious organizations (880). Using the 1992 March Annual Demographics File of the Current Population Survey we estimate the differentials by education class to be:

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The fourth benefit is based on the fact that investment in education has a payoff in the future. Eligible AmeriCorps members earn a voucher worth $4,725 after each year of satisfactory service, ($2,363 for a part-time year). Part of the payoff from this voucher is in enhanced earnings and part is intangible. For example, many would argue that education has current consumption value: some individuals enjoy the process of learning and benefit from the exposure education gives them to nonmonetary values such as ethics, aesthetics, and so forth. These benits are difficult to measure and we are forced to ignore them. These benefits accrue over and above the enhancements to future earnings that can be measured, and because we ignore such benefits we understate the value of the vouchers.

The education vouchers offered for rational service have a special structure: they can be used (within a seven year period) for additional education, or they can be used to pay off existing post secondary loans. They are not transferrable. To the extent that vouchers are used to pay off loans for preexisting investments in human capital, or that they finance additional investments in human capital that would have been made in any event, there is no investment value to the vouchers. Thus, a voucher paid to an individual who uses it to pay off a student loan counts as a transfer of $4,725 to the participant, but it generates no further benefits. In contrast, a voucher that enables an individual to obtain additional education that would not otherwise be undertaken generates an enhanced stream of future earnings, the present value of which should be attributed to the voucher. The voucher is an option that the government has sold to the AmeriCorps member. If it is not used, it produces no further investment benefits to society, but it also costs society nothing."

The short span of data available does not allow calculation of the number of education voucher "options" expiring unexercised; we assume that eventually all will be exercised." As noted above, the exercise of an option does not mean that AmeriCorps generated social benefits by the issuance of that option: some of the exercised options were used to pay for investments already made and some were used to pay for investments that would have been made in any event. As of March 21 of this year, 11% of service awards from the previous summer were used to pay off education loans and 89% were used to finance current education expense. Discounting future educational benefits by

"That an option expires unexercised does not mean that it did not have value; such expirations occur routinely in financial markets.

15 Education vouchers enter both costs and benefits, so error in assuming that all will be exercised is largely offset.

11% would overstate the contribution of the program because some of the remaining 89% will finance education that would have continued in any event. Previous studies of the G.I. Bill suggest that educational vouchers increase post-secondary enrollments by 40%. The education voucher available under the AmeriCorps program, however, is not as generous as was the G.I. Bill. It is available for two years, not four years, and relative to average monthly earnings it is only 50% of the value of the G.I. Bill subsidy. Therefore, we evaluate its net effect as 1/4 of the G.I. Bill effect, or 10%.

Table 1 shows the present value of future labor earnings by education level. To obtain these data we computed annual earnings of full-time, full-year male workers using the Annual Demographic File of the Current Population Survey for 1992. This produced the age-earnings profile, tabulated by education level, and we reduced this to present value using the following assumptions.

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(b)

It takes two years to obtain some college, 4 years to attain a college
degree, and 6 years to obtain an advanced degree;

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(d)

Earnings are discounted for the time value of money at the social
discount rate in inflation adjusted terms of 2%;" and,

(e)

Earnings are discounted for labor force participation at the combined
male-female rate of 66.2%.

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Source: Computed from March, 1992, CPS Annual Demographics File.

We compute the value of the education vouchers in the following way. AmeriCorps requires, and we assume that every high school dropout who enters the program receives, a GED. Following the work of Cameron and Heckman" the attainment of a GED degree leads to a 6% addition to productivity, measured by annual earnings. Further gains due to attendance in post-secondary

"See the staff report of the Joint Economic Committee, "A Cost-Benefit Analysis of Government Investment in PostSecondary Education Under the World War II GI Bill," December 14, 1988; Peter J. Matilla, [1978], "G.I. Benefits and Enrollments: How Well Did Vietnam Veterans Fare?" Social Science Quarterly, 59,3:435-45; and David O'Neill, [1977]. "Voucher Funding of Training Programs: Evidence from the G.I. Bill," Journal of Human Resources, 12,4:425-45. "We used mortality data from BLS Bulletin 2254, "Worklife Estimates: Effects of Race and Education," Table A-1, 10. The 2% discount rate is the difference between inflation and the government 1-year t-bill rate over the past 30 years. See Pindyck and Rubinfeld, [1995], Chapter 15 for a discussion of using the risk-free rate of return to discount future benefits and costs.

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See Stephen V. Cameron and James J. Heckman, [1993], "The Nonequivalence of High School Equivalents," Journal of Labor Economics, 11,1:2-47.

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