Financing Early Education

Why does early education need more public funding? Early education is an essential investment Too few children have access to programs Program quality needs to be increased Parents need help

Can America afford high-quality early education? How much money does early education need? How much money is available now? How can early education get the funding it needs?

Why This Matters Now

America faces a long-term public finance problem The federal budget is on an unsustainable path Social security, Medicare and Medicaid have risen from

30% of non-interest spending in 1980 to 45% today These 3 will consume 75% of the budget by 2040 This unfairly burdens today’s childrenEarly education is one investment that: Increases future workers ability to fund federal programs Reduces future government costs Increases intergenerational fairness

Economic Benefits of Early Education

Increased Productivity Increased maternal employment and earnings (child care) Increased skills and knowledge Increased high school graduation and college attendance Increased skilled employment and earnings Decreased Costs of Government Reduced grade repetition and special education Fewer protective services cases Less welfare dependency Reduced crime and delinquency Decreased health care costs and mortality

Economic Returns to Early Education for Disadvantaged Children

Cost Benefit to

Society

Perry Preschool: $12,000 $108,000 Abecedarian: $35,864 $136,000 CPC: $7,000 $ 48,000

All three studies find that economic benefits from intensive, high-quality programs to taxpayers and participants combined far exceed the cost of high-quality programs (comparable to the cost of public education generally).

Could universal preschool produce similar benefits for the middle class?

Middle class children have fairly high rates of the problems that preschool reduces for low-income children.

Reducing these problems could generate large benefits.

Income Retention DropoutLowest 20% 17% 23%20-80% 12% 11%Highest 20% 8% 3%

Source:US Department of Education, NCES (1997). Dropout rates in the United States: 1995. Figures are multi-year averages.

Preschool Enrollment (Age 4) by Mother’s Education

52%

64%73%

82%

0%10%20%30%40%50%60%70%80%90%

< HS HS Some Coll Coll Grad

Mother's Education

High Quality Preschool Programs Needed to Produce Benefits

Well-educated preschool teachers

Adequate teacher compensation

Small classes

Strong supervision

High standards for learning and teaching

Parents Need Help

High quality early education is expensive Good preschool costs more than state college tuition Parents can’t afford child care and educational quality Early education has become a middle class necessity Single earner families with a parent at home need help too Lower-income families are left far behind Left on their own parents invest too little in early education Most families do not invest rationally for the long-term Parents overestimate current quality of preschool When most benefits are public even rational private

investment is too low

Cost of Early Education

What determines the cost of early education? Design of the program--hours, services, quality Who is eligible--targeted or universal Take up rates Systems costs--start up and infrastructure

What are benchmarks for cost? Per pupil costs of K-12 education ($9-$12K in region) Per pupil costs of preschool special education Per pupil costs of Head Start Cost is not the same as state expenditure

Early Education Cost in Perspective

American economy, annual GDP = $10,340 billion Federal annual spending = 2,000 billion State and local annual spending = 1,000 billion Social Security and Medicare = 705 billion First budget for Iraq war = 87 billion Agri-business subsidies = 20 billion

All major federal programs 0-5 = 16 billion State Pre-K = 2 billion

What is the Real Early Education Financing Problem?

America can afford any early education system it wants Adequate public funding requires a small, but not

insignificant, share of government revenue Voters are not demanding better early education (FL?) Early education constituencies are not demanding more Early education must be marketed to voters, its natural

constituencies and new constituencies It’s the economy, stupid!

There is no time like the present

State and local revenues will improve in the near future The number of young children will increase through 2020 The federal budget situation will become more difficult Some states will gain population (NJ), others will lose

population which can shrink K-12 enrollment Falling K-12 enrollments open the door to “fund” Pre-K

through the schools (administration, facilities, teachers)

Where will the money come from?

Increasing taxes and fees--dedicated taxes or general revenue

Increasing gaming revenues Borrowing Obtaining a larger share of current education and child

care program funding (Title I, reducing 12th grade) Obtaining a share of other program’s revenues Cutting other government programs and tax breaks Charging parents

Conclusions

Early education is a good economic investment that needs greater public funding

Increased public funding depends primarily on political influence

Finance is more a political problem than a technical problem

Public financing is likely to become more difficult in future decades