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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 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:
CPC:
$35,864
$7,000
$136,000
$ 48,000

All three studies find that economic benefits from intensive, high-quality
programs to taxpayers and participants combined far exceed the cost of highquality 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
Lowest 20%
20-80%
Highest 20%
Retention
17%
12%
8%
Dropout
23%
11%
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
90%
80%
70%
60% 52%
50%
40%
30%
20%
10%
0%
< HS
73%
82%
64%
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

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American economy, annual GDP
Federal annual spending
State and local annual spending
Social Security and Medicare
First budget for Iraq war
Agri-business subsidies
= $10,340 billion
= 2,000 billion
= 1,000 billion
=
705 billion
=
87 billion
=
20 billion
All major federal programs 0-5
State Pre-K
=
=
16 billion
2 billion
What is the Real Early Education
Financing Problem?
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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
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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?
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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