Responding to state budget concerns

As outlined in a previous post, many states are facing budget shortfalls for fiscal year 2012 (the fiscal year which starts July 1, 2011 in most states, and runs until June 30, 2012). In another post, I pointed out that even facing budget crises, many governors and legislators are able to find room for sizable new initiatives. In many cases, such new initiatives are much larger than some of the wildest dreams of early childhood advocates. We can afford to invest in early childhood programs. Whether we do so is a question of priorities.

However, in some states the political reality may be that early childhood programs will be called on to show budget efficiencies.   What might be the best response if that is the political reality?

Quality of early childhood programs should never be negotiated away. It is a poor compromise to agree to budget cuts that result in program quality that is inadequate. Maintaining program enrollment with inadequate program quality does not promote state economic success. In the long-run, it probably is a recipe for the program’s political death.

After quality is assured, early childhood advocates should strive to keep coverage as broad as possible among the children and families who are most likely to show strong benefits from the program.  For programs such as the Nurse Family Partnership, that is all disadvantaged first-time mothers. For preschool, as I have outlined in previous posts, the evidence is that there are strong benefits both for children from low-income families, and for children from middle-income families.

Keeping benefits broad obviously has political advantages. Narrowing participation to only some beneficiaries, when others may benefit almost as much, also raises questions of equity. In addition, such narrowing makes it harder for the program to have large impacts.  Too narrow a program cannot have sizable impacts on state economic development.

Cost-sharing can be negotiated. This cost-sharing should be focused on some of the beneficiaries from early childhood programs, as long as such cost-sharing does not significantly reduce access to the program or program impact.

For example, as outlined in a previous post, high-quality preschool programs will lead to lower special education costs for local school districts. Therefore, a larger school district share of costs might be negotiated.

High-quality preschool programs may also lead to higher property values. As outlined in several previous posts, these higher property values may occur because parents may be attracted by higher school test scores and other effects of better preschool access. Therefore, local communities may legitimately be asked to devote some property tax revenues to support such programs.

One can imagine some creative financing approaches. For example, states could consider establishing tax increment financing districts for areas that fund early childhood programs. Some portion of the property tax revenue from property value increases in such districts could be devoted to early childhood programs. This may reduce the long-run need for state budgetary support for these programs.

How about fees for families participating in early childhood programs? As always, the devil is in the details. If the fees are imposed on upper class families that can afford to pay the fees, and who in any event probably have somewhat lower benefits from the programs, then the fees might help reduce state budgetary costs without impairing much the overall effects of the program. On the other hand, large fees on middle class families might sizably reduce participation of many children who would have benefited considerably from the program. Such fees, by narrowing program access, may significantly reduce the state economic development benefits of early childhood programs.

Accountability is a legitimate demand of state budget reformers. Early childhood programs should welcome well-designed accountability requirements. The effects of many early childhood programs can be rigorously evaluated. For example, for preschool programs, it is possible to do a rigorous evaluation with well-designed tests administered at preschool entrance and kindergarten entrance. These tests should look at both “hard skills” (e.g., literacy skills, math skills) and “soft skills” (socio-emotional skills).

Well-done accountability provisions for state-funded early childhood programs are likely to demonstrate that many such programs are efficient ways to achieve public goals, such as increased test scores of 3rd graders. On the other hand, such accountability provisions may lead to some weaker providers of early childhood programs being identified, and forced to improve or be defunded.

None of this is meant to alter my conclusion that on the whole, states should be considering ways to increase the overall investment in high-quality early childhood programs. This is much more easily accomplished with state budget expansions than with state budget cuts. However, if the political reality is that there will be state budget cuts, it is best to maintain program quality and equitable program coverage with some cost-sharing from other units of government, or some use of creative financing approaches.

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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