Statehood Quarters: The 1997 Feasibility Study

50 State Quarters HQ     How It All Got Started     10-Yr Schedule     State Quarter Errors         State Quarters Mintages     State Quarters FAQs     SQ Albums & Supplies On October 20, 1996, Congress passed the United States Commemorative Coin Act, providing the framework for a possible new series of circulating statehood quarters.  The Act required the Treasury Department to conduct a study on the viability of such a program, and decide by August 1, 1997, whether to proceed with a statehood quarter program.  The department awarded a contract to Coopers & Lybrand (C&L) to conduct this study.   The results of the study encouraged the statehood quarters program to move forward.  What is less known is the fascinating data gathered by the study, and the predictions made by C&L on the basis of this data.  This section focuses on the expectations we had for the program, long before the striking of the first statehood quarter.   -- Would the Public Accept and Use Statehood Quarters? -- What Would be the Statehood Quarters Demand? -- What was the Predicted Financial Return to Government? -- Could Potential Production Needs be Met by the Mint? -- Overall Tone of Report Presented to Secretary   The 64-page Coopers & Lybrand study was turned over to the Treasury Secretary on May 30, 1997. C&L tabulated both quantitative data (numbers and percentages) and qualitative data (opinions), acquired through telephone polling and face-to-face focus groups, respectively, in March and April, 1997.   Today, we recognize how successful the statehood quarters program has been since its inception in 1999.  When our hindsight experience is compared to what average people had to say in 1997, it provides quite entertaining reading.   Let's review what the government crystal ball had to say about the feasibility of a statehood quarter program. Back to Top   Would the Public Accept and Use Statehood Quarters? C&L and their sub-contractor, Opinion Research Corporation, conducted a telephone survey from March 17-30, 1997.  A total of 2032 persons age 18 and older participated in the survey.  The large sample size was selected to provide a 98 percent confidence interval (many polls sample in the 1000 size range, yielding only a 95 percent confidence interval) and to provide statistically valid subsets of important demographic groups. Each telephone interview lasted about 12 minutes.  Questions were structured around these general topics: Recollection and saving patterns for Bicentennial quarters. Overall impression of the Statehood quarters concept and their reasons for liking or disliking the idea. The design submission and selection processes and topics for designs. Likelihood, extent and reasons for saving Statehood quarters. Data for the sample group was tabulated, and provided the basis for assessing likely public acceptance of statehood quarters across the entire population.  The survey also shed light on anticipated collection rates and demand for the statehood quarters. The results of the telephone survey indicated that 51 percent of the respondents had a favorable impression of the statehood quarters concept; 38 percent didn't care one way or the other; only 11 percent thought it was a lousy idea.  The survey indicated greater acceptance from younger people, households with children, self-identified coin collectors, and those who remembered the Bicentennial coins.  Results by income level did not vary.  The results of the telephone survey question regarding overall impression of the program are presented here: Results based on telephone interviews with 2032 adults, from March 17-30, 1997. The interviewers asked respondents about why they thought statehood quarters were a good or bad idea.  Responses followed these basic themes: Positive Themes State pride /  Nice Way to Honor Each State Nice Collectible for Self, Others, Children, or Grandchildren Historical, Heritage, or Educational Significance Time for a Change / Unique Concept / "Just a Neat Idea" Stimulates Interest in Coin Collecting Negative Themes Concern Over Cost of Program Government has better things to do Too confusing / Too many designs Like coins they way they are / No need to change To dig deeper for opinions, focus group sessions were held in six geographically diverse cities from April 7-16, 1997.  Each two-hour session consisted of 9-12 residents of the city.  Two sessions per city were held. The cities selected: Boston, MA Raleigh, NC Seattle, WA Dallas, TX Toronto Edmonton The Canadian cities were included to learn about actual impression of the Canada 125 Circulating Quarter Project.  Because the sample size of the focus groups was small, the percentages were statistically invalid, but they provided a good platform for attaching opinions to the quantitative data gathered from the phone surveys. Positive Remarks from focus group participants centered around the basic themes heard during the phone interviews: "I think it's great.  I imagine little kids trading.  You know, I'll give you a Rhode Island for a Texas or something.  I think the educational value is great." "I think it teaches us about U.S. history.  Some people, you know, who do not know what year all the states were admitted.  They get to know which one came in what order." "I like the idea of change.  The United States in one of the few counties that hasn't changed its coin or currency to keep pace with the modern world.  At the same time, I think it's a neat idea having the charm of the individual histories of the Sates in some way on the coins.  I kind of like that." "I have children, one's middle school age and one is elementary school age.  I think they would be very interested in looking through all the change anyone's got to see different ones.  And I think it would be of great interest for school age children." The negative comments verbalized during focus group sessions centered in two areas.  Participants wanted to know why the Government was proposing this program and worried about the potential cost.  Here are a few specific opinions: "I was going to ask you why the Government wants to do it.  Just to encourage collection of these?  Because why should the Government go to the added expense of minting and designing these quarters?  I just want to keep Government costs down.  Quarters are quarters." "I think they could spend their time doing something more important" "What's the motivation behind it?" The data and opinions indicated that the statehood quarters program would enjoy wide public acceptance, but the undercurrent of skepticism should not be ignored, C&L warned.  Many focus group participants asked if the new quarters had anything to to with the new millennium, or if there was some hidden purpose for starting the program in 1999.  What was clear, too, was that many participants did not realize that the statehood quarters program stood a good chance to actually net positive income for the government, and be no burden to the taxpayer. C&L concluded that should the government decide to proceed forward with the statehood quarters program, a clear and decisive public awareness campaign ought to accompany the implementation of the program, to inform the people of the true nature, purpose, and cost of the statehood quarters. Back to Top   What Would be the Statehood Quarters Demand? Respondents to the telephone interviews were also asked about their interest level in setting aside statehood quarters.  About 54 percent indicated there was at least a good possibility in saving the coins.  Another 20 percent expressed a fair level of interest in collecting the coins.  Only 25 percent said there would be little or no chance that they would save the coins.  One percent didn't know what to think. If these numbers were projected out toward the entire US population, at least 100 million people would be setting aside statehood quarters as keepsakes. Of the 74 percent of the respondents who showed at least some interest in collecting the quarters, about two-thirds of them envisioned themselves collecting full sets of state quarters instead of individual coins.  Of this sub-group, the average anticipated collection rate was 7.8 sets per person (50 coins in a set).  This anticipated collection rate is consistent to the known collection rate for the 1975-1976 Bicentennial quarters.  The telephone survey discovered that approximately 34 percent of the American adult public is still keeping an average of 27.5 of the Bicentennial quarters. C&L employed a series of complex analyses to factor the future coin demand attributable to the statehood quarter program, based on actual responses from telephone interviews, accepted assumptions, population extrapolations, number of anticipated coins saved per person, etc.  Thus in 1997, C&L drew the following conclusion regarding the 10-year statehood quarter initiative: The demand for statehood quarters by collectors during the life of the program will approximate 25.3 billion coins. This is the number of quarters above and beyond those produced to meet the commercial needs of the nation.  Said another way, the prediction in 1997 was that 25.3 billion statehood quarters would disappear into the pockets of approving collectors, mostly never to be seen again.  The seigniorage savings to the government attributable to the statehood quarters, discussed below, were drawn from this figure.  To put this somewhat in perspective, "only" 14.7 billion circulation quarters were minted from 1989-1998. So how accurate was this projection?  We'll delve into that question in the section below.     Back to Top   What was the Predicted Financial Return to Government? The Treasury earns revenue for each coin minted and placed into circulation.  This is because each coin is manufactured for a small fraction of their face value, which are then "sold" at full face value to the Federal Reserve Bank for eventual release into circulation.  The difference between the cost of producing a coin and the face value is called "seigniorage."  The seigniorage profit for quarters at the beginning of the state quarter program was about 20 cents per coin.  [Rising metal prices reduced seigniorage profits to approximately 16 cents per coin as of late 2007].   Increasing production and payout of quarters to the Federal Reserve Bank generates additional seigniorage.  C&L reasoned that if the statehood quarters program were implemented and proved to be popular, increased demand for quarters would be realized, resulting in greater seigniorage revenue for the government.   Some collectors buy State Quarters by 100-coin bags.  The bag shown above will net the government a little over $20 in seigniorage profits.  United States Mint image.. Seigniorage estimates were modeled by C&L.  Using the 74 percent of telephone interviewees who said they were interested in saving quarters, the mean average number of quarters anticipated to be saved per person, and accepted extrapolation methods, the highest seigniorage revenue attributable to this program was projected to be $5.1 billion over the ten year period.  At 20 cents per coin, this translates to 25.3 billion coins minted to satisfy statehood quarter collectors.   By late 2007, all but five of the State Quarter designs had been released.  The program had generated about $5.0 billion in seigniorage since it began in 1999, according to government reports.  Apparently, these reports are including the seigniorage realized for every quarter sent to the Federal Reserve, not just the quarters saved by collectors.  No report indicating the seigniorage attributable strictly to State Quarters could be found.  Up to this point in time, about 25 billion statehood quarters existed.  The Mint estimates some 130 million people are collecting statehood quarters to some degree.  Surely a substantial percentage of these 25 billion quarters are in the hands of collectors.   By the time the last Hawaii statehood quarter is struck in late 2008, we'll have a clear measure of the accuracy of C&L's projections.  But from where we sit today, it appears as if the projections made in 1997 for statehood quarter collector demand and seigniorage revenue may end up exceeding the mark.   In terms of collecting popularity, the 130 million statehood quarter enthusiasts exceeds the 100 million or so inferred nationally from the percentages of interviewees who told C&L they had some interest in setting aside statehood quarters.  After all, just about all of us knows someone who scours through pocket change searching for the newest quarter.     Back to Top   Could Potential Production Needs be Met by the Mint? One section of the C&L study sought to determine if the Mint could meet production demand for statehood quarters in addition to regular economic requirements for twenty-five cent coins.     The Denver and Philadelphia Mints are the most prolific coin producing facilities in the world.  Billions of coins are struck every year. United States Mint image. The approach to assessing whether sufficient manufacturing capacity existed to support projected overall demand included the following factors:   -- Document existing capabilities. -- Identify planned manufacturing upgrades. -- Develop assumptions necessary to assess     future capacity. -- Estimate incremental demand. -- Identify potential bottlenecks and develop     alternative strategies. The conclusion drawn was that the Mint would be capable of producing enough quarters to meet the most realistic demand scenarios.  Planned capital equipment purchases totaling $32 million was deemed sufficient to expand manufacturing capacity. Additional capacity to handle greater than expected demand could be attained by investing $35 million in new production lines in the Philadelphia and Denver minting facilities.  Contingency plans to meet temporary, unexpected spikes in demand involved conversion of penny presses to quarter production, overtime, and use of existing Washington/Eagle quarter stockpiles. Bottom Line: C&L believed the Mint would have not trouble in meeting statehood quarter demand.  This indeed proved to be true. Back to Top   Overall Tone of Report Presented to Secretary On May 30, 1997, Coopers & Lybrand sent their statehood quarter feasibility report to Treasury Secretary Robert Rubin.   As required by the United States Commemorative Coin Act of 1996, the study accomplished all the following: Assess likely public acceptance of and consumer demand for the different coins which may be issued under the program taking into account the length of the program. Compare the costs of producing the Statehood coins and the revenue that the program would generate. Assess the impact on coin production and distribution systems. Document the advantages and disadvantages of different approaches to selecting designs for coins in such a program. Note other factors which the Secretary may consider appropriate in deciding upon the feasibility of the program. C&L did not make a recommendation whether to proceed with the statehood quarter program.  Their job was to provide research data to the Secretary.  The 1996 law dictated the sole responsibility for an up-or-down decision rested with the Secretary.  However, the overall tone of the report was positive, in that most of the data indicated a statehood quarter initiative was indeed viable. The same law required the Secretary to make a decision by August 1, 1997.  After evaluating the data, Secretary Rubin elected to proceed forward with the statehood quarter program.  The next step was to go back to Capitol Hill, where one final Act of Congress was required to set the machinery of government moving.  As they say, the rest is history. If you're interested in picking up the story of the statehood quarters from this point onward, we recommend you go to our "How it All Got Started" section.   Back to Top   ©Copyright 2008 by us-coin-values.advisor.com.  All rights reserved.   Use of any content contained on these website pages without the expressed written consent of us-coin-values-advisor.com is strictly prohibited. No copyrighted images may be used without permission of original copyright owner.