Financing Early Education

1
Financing Early Education

• Presentation to
• Governors Forum on Quality Preschool
• December 15-16, 2003
• W. Steven Barnett, Ph.D.
• National Institute for Early Education Research
• Copies and details available from www.nieer.org
• [phone], sbarnett_at_nieer.org

2
Financing Early Education Presentation Overview

• 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?

3
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 todays children
• Early education is one investment that
• Increases future workers ability to fund federal
  programs
• Reduces future government costs
• Increases intergenerational fairness

4
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

5
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).

6
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 Dropout
• Lowest 20 17 23
• 20-80 12 11
• Highest 20 8 3
• SourceUS Department of Education, NCES (1997).
  Dropout rates in the United States 1995.
  Figures are multi-year averages.

7
Preschool Enrollment (Age 4) by Mothers Education
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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

9
Parents Need Help

• High quality early education is expensive
• Good preschool costs more than state college
  tuition
• Parents cant 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

10
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
• Per pupil costs of preschool special education
• Per pupil costs of Head Start
• Cost is not the same as state expenditure

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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
• Agri-business subsidies
  20 billion
• All major federal programs 0-5 16
  billion
• State Pre-K 2 billion

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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
• Early education must be marketed to voters, its
  natural constituencies and new constituencies

13
There is no time like the presentfor financing
preschool

• 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, others will
  lose population which can shrink K-12 enrollment

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Where can 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 programs revenues
• Cutting other government programs and tax breaks
• Charging parents

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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 (at least at the federal level)
  is likely to become more difficult in future
  decades