Proposed pre-k budget cuts in New Jersey

Steve Barnett of the National Institute for Early Education Research (NIEER) has a blog post on recent proposals to cut back New Jersey’s Abbott preschool program from a full-day to a half-day program. This Abbott program, which was prompted by a New Jersey Supreme Court decision, includes preschool services at ages 3 and 4 to all children in certain urban school districts.

According to Professor Barnett, the proposal to reduce the Abbott program from full-day to half-day is intended to save somewhere between $150 million (Barnett’s figure) and $300 million (the figure of those advocating for this change).  These budget savings would be used to provide extra K-12 funding to districts with higher percentages of senior citizens or higher transportation costs, or that have demonstrated budget efficiencies.

I suspect that proposals to trim early childhood budgets in one way or another will become increasingly common in the next few years. Numerous states face significant fiscal challenges. The length and severity of the “Great Recession” is one reason for these fiscal challenges. Another reason for these fiscal challenges is that federal stimulus funds to help state and local governments have mostly run out. Current political realities make it unlikely that there will be large amounts of additional federal budget aid to state and local governments.

I hope in a future budget post to suggest some principles to guide how advocates for early childhood programs should react to these budget cutback proposals. In this post, I want to simply consider this specific proposed cutback in New Jersey.

As I have discussed in a previous post, expanding pre-k from a half day to a full-day probably has a lower ratio of benefits to costs than for a half-day program. However, it is clear that there are benefits to children in moving from a half-day to a full-day. The measured benefits for economic development are somewhat less than costs, but it is likely that if we include unmeasured benefits for economic development, then benefits do exceed costs.

Whether a cutback from a full-day to a half-day makes sense depends in part on what alternative use is made from these funds. For example, if the proposal was to use these additional funds to expand preschool access for disadvantaged children in other New Jersey school districts, this proposal is more likely to have merit. If the proposal was to expand specific K-12 programs with demonstrated high effectiveness, the proposal might have merit.

However, the benefits are lower and more uncertain if the proposal is to use the cost savings to provide more general assistance to K-12 districts with certain characteristics. My calculations in chapter 5 of Investing in Kids suggest that as a general rule, investing extra dollars in preschool education is likely to have a higher payoff than investing extra dollars in general support for K-12 education. This is not meant to imply that investing in K-12 education is a bad idea. However, the payoff to early investment per dollar invested is higher.

Therefore, the specific proposal being considered in New Jersey does not seem to be the most efficient use of scarce funds for investment in education. More information on New Jersey’s budget situation would be needed to examine alternative budget proposals that might make sense.

One alternative  that should be considered is to use increased state and local taxes to fund any needed additional K-12 funding that might be required, rather than financing this K-12 funding through reduced preschool funding.  In the short-run, solving state budget problems through tax increases rather than spending cuts will help better preserve demand for goods and services produced in the state. (This is not necessarily true in the long-run, but depends on the particulars of a tax and spending package. Early childhood spending, as argued in the book Investing in Kids and this blog, does have large economic effects in the long-run, so tax increases would be better than cutting back on high-quality early childhood programs in the long-run.)

Why is demand for goods and services less adversely affected through tax increases than through spending cuts? The reason is that only a portion of tax increases would have been spent by private households on goods and services produced in the state, whereas spending cuts directly reduce demand for goods and services produced in the state.

I will elaborate on this analysis in a future blog post on state budget problems and early childhood programs.

About timbartik

Tim Bartik is a senior economist at the Upjohn Institute for Employment Research, a non-profit and non-partisan research organization in Kalamazoo, Michigan. His research specializes in state and local economic development policies and local labor markets.
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