State fiscal problems and early childhood programs

Many states face significant fiscal problems over the next several years. These fiscal problems will lead to attempts to cut back on early childhood programs.  How should advocates for early childhood programs respond to these threatened cutbacks? I will address this in several blog posts. This post begins by describing the size of the state fiscal problem.

The state fiscal crisis is serious.  According to the Center for Budget and Policy Priorities (CBPP), 44 states are facing budget shortfalls for fiscal year 2012, which in most states runs from July 1, 2011 until June 30, 2012. The combined budget shortfall for these 44 states is estimated at $125 billion.

Why are these shortfalls so serious? First, the U.S. “Great Recession” is proving to be quite prolonged. For example, the Congressional Budget Office is projecting that the U.S. unemployment rate will only drop to 8.2% by the last quarter of calendar year 2012. This contrasts with the 4.6% unemployment rate that the U.S. economy had in 2007, prior to the recession.

Second, states are facing economic tough times in FY 2012 with less federal stimulus assistance. According to CBPP, absent federal policy changes, federal stimulus aid to the states will drop from $59 billion in FY 2011 to $6 billion in FY 2012. This drop in fiscal stimulus aid of $53 billion explains over 40% of the states’ FY 2012 problem.

In addition to the short-run fiscal problems, many states face long-run fiscal problems. Common long-run fiscal problems include: sales taxes that grow slower than state personal income because they exempt many services; increasing magnitude of tax deduction and exemptions over time; property taxes that are increasingly limited by state constitutions and laws; in some states, either no income taxes, or flat-rate income taxes that are insufficiently responsive to state income growth;  increasing public worker pension costs; increasing health care costs for the state share of Medicaid, as well as public workers and public worker retirees; increasing  correctional system costs.

Early childhood programs have done OK in recent years despite state budget crises. For example, for fiscal year 2011 (July 1 2010 to June 30 2011 in most states), states had to deal with a budget shortfall of $130 billion. Despite this budget shortfall, Pre-K Now reports that overall state pre-k funding increased by a little bit over 1%, to $5.4 billion.  Fifteen states and the District of Columbia increased their pre-k spending; 11 states flat funded pre-k; and 10 states reduced pre-k funding. (Four other states did not have final figures for pre-k funding, and 10 states do not have state-funded pre-k.)

However, this past political success may not predict future success for efforts to maintain or expand pre-k and other early childhood programs. Each additional budget shortfall forces state officials to look for new sources of budget savings, as what has been cut once cannot be cut again. In addition, the political makeup of most state legislatures and many governors has shifted in a more politically conservative direction.  Finally, there is some increased awareness of the long-term budget problems facing state and local governments.

Subsequent posts will consider how early childhood advocates can respond to these budget issues. To anticipate my conclusions, I will argue that budget reforms can and should make room for needed investments in high-quality 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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4 Responses to State fiscal problems and early childhood programs

  1. Annemarie Harris says:

    Thank you for addressing this issue. It is obviously highly relevant in Michigan, let alone other parts of the country. While I believe Governor Snyder is forward-thinking, and investment-minded, early childhood is not the only priority out there. I look forward to your posts that help us think about how to position early childhood in the budget priority dialogue.

  2. timbartik says:

    Thanks for your comment, Annemarie. I am aware of active debates over downsizing early childhood programs in Iowa, New Jersey, and Georgia. I’m sure there are more I am not aware of, or that will develop in coming weeks. On the other hand, there is a proposal to expand preschool in Vermont. The National Institute for Early Education Research has a useful “news item” feature that regularly finds news stories on pre-k from around the nation.

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