The National Institute for Early Education Research (NIEER) today released its annual Yearbook on “The State of Preschool”.

The headline for this study is that for the first time since NIEER began tracking state pre-K spending and enrollment trends in 2001-2002, total state pre-K spending declined in real dollars (i.e., inflation-adjusted dollars) compared to the previous year. In real dollars, total state funding for pre-K declined by nearly $30 million, comparing fiscal year 2009-2010 funding with funding for the previous 2008-09 fiscal year.

However, I think the real battle for state pre-K funding will be determined during the current budget battle, over the fiscal year 2011-2012 budget. Right now, state pre-K is threatened with major funding cuts in many states, such as North Carolina, Iowa, and Georgia.

If one looks at state funding trends from 2008-2009 to 2009-10, pre-K actually survived rather well compared to some other budget areas. The decline in inflation-adjusted state funding for pre-K from 2008-09 to 2009-10 was only about one-half of 1%.

In contrast, let us look at the most current figures on state and local government spending, which come from the National Income and Product Accounts (NIPA) put out by the U.S. Department of Commerce.  State and local spending on gross investment, measured in inflation-adjusted dollars using the appropriate price deflators from the NIPA, declined from the 2008-2009 to 2009-2010 fiscal years by 3.1%.  State and local government real spending for current services (“consumption expenditures”) declined, from the 2008-2009 to 2009-2010 fiscal years, by 0.9%.

Total real state and local government spending from 2008-2009 to 2009-2010 increased by 1.4%. But this was due to a real increase of over 7% in government social benefit payments. This increase was largely driven by high unemployment due to the Great Recession.

Given how hard state and local governments were squeezed by the high unemployment of the Great Recession, higher social benefits squeezed many other areas of state and local government spending. This included much spending on investment and current public services. State pre-K spending did better than many other investment and service areas.

The battle over 2011-12 state spending is crucial. Almost all of the federal anti-recession aid to states has gone away by this fiscal year. States are largely left to their own resources. However, the economy is beginning to recover. States are beginning to consider how to position themselves to economically compete in a recovering U.S. economy. Will states choose to invest in pre-k and other early childhood programs as part of their economic recovery strategies? The answer is blowing in the political winds.