The potential for “peeksee” financing of pre-k programs

I have been involved with some discussions of potential new sources of financing early childhood programs. These discussions have been coordinated by the aptly-named “Early Childhood Finance Innovations” Working Group. This Working Group has been convened by the Kauffman Foundation, and the Partnership for America’s Economic Success.

One important idea being explored is what is currently being labeled PKSE (“peeksee”) financing of pre-k programs. This PKSE financing is a particular way of trying to use special education cost savings to finance pre-k.

Here’s the idea. Suppose some private individuals or foundations want to contribute some charitable donations to expand pre-k programs. But they want their donations to lead to a sustainable program that can generate its own financing.

To do so, these private charitable donations would be committed upfront to provide full financing of expanded pre-k for at least 10 years. These donations would go into a dedicated fund to support an expanded number of slots in high-quality pre-k in a certain geographic area. In return, local school systems would agree to pay into the dedicated fund the identified savings in special education costs from the expanded pre-k slots. At the end of 10 years, the private charitable donations would begin to phase out. But the PKSE concept is that the school system payments would at that point be sufficient to sustain the pre-k program at that same expanded level, or even to further expand pre-k slots.

If such a system works, it has the advantage for local school systems of expanding pre-k without any requirement for the school districts to make up-front investments. In the long-run, school districts would not lose any funds from PKSE financing.

PKSE financing has the advantage for local charitable interests of answering the question of sustainability. If the model works, then temporary private charitable donations will have led to a permanent improvement in early childhood development systems.

This possible model raises a number of questions. Probably the most crucial questions are the following:

(1)    Are the special education cost savings sufficient to make the system be sustainable? This requires that the full K-12 savings in special education costs exceed the cost of the pre-k program for the additional children being offered pre-k services.

(2)    What changes in federal or state regulation of special education funding might be required to make this system workable?

(3)    How specifically would the system in practice identify special education cost savings on an ongoing basis?

(4)    Exactly what formula would be used for switching over from charitable funding to K-12 funding?

As the Working Group’s recent discussions indicated, there are some efforts around the country to get answers to some of these questions. These include efforts in Utah, Colorado, Minnesota, and Alexandria, Virginia.

More details on the PKSE idea can be found in the following powerpoint, from Robert Dugger of PAES and Bob Litan of the Kauffman Foundation.

I think this is a promising idea. But we will have to see whether the numbers work out for this model by itself to lead to fully sustainable funding.

In addition, as I have noted in previous posts, many early childhood programs may have substantial long-term benefits, for example in the form of state economic development benefits or lower crime, without having sufficient special education cost savings to finance these programs. The case for early childhood programs does not rest on special education cost savings. “Peeksee” financing should be seen as a means to the end of financing early childhood programs, not as the main rationale for 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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