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: (732) ,

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?

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 children Early 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 Dropout Lowest 20%17% 23% 20-80% 12% 11% Highest 20% 8% 3% Source:US Department of Education, NCES (1997). Dropout rates in the United States: Figures are multi-year averages.

Preschool Enrollment (Age 4) by 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  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 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  Early education must be marketed to voters, its natural constituencies and new constituencies

There is no time like the present for 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

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