A recent report released by ReadyNation, prepared with support from the Kauffman Foundation, provides much research information on how special education cost-savings might be used to fund high-quality pre-K. The report, written by Rob Dugger and Bob Litan, argues that some recent estimates of special education cost savings suggest that these cost savings may be sufficient to fully fund high-quality pre-K. In particular, this report points to the results for the Pennsylvania Pre-K Counts study, which found that this program was associated with a decline in the rate of special education assignment from 18 percent to 2.4 percent.

A great deal of the report explores what the implications of these findings are for financing pre-K programs with a combination of some state government assistance, some program-related investments by private philanthropies, and some bond financing by private investors. The specifics of the resulting cash flows depend upon the assumptions made, but under many combinations of assumptions, it is certainly possible for pre-K to generate positive cash flows in the long-run, if the special education cost savings are large enough.

While I think the financing discussion of the report is important, for some readers it might obscure the larger point: pre-K can generate significant cost savings that can be used to finance a large part or perhaps all of its costs. This is true regardless of who provides the initial financing.  Private investors can provide the financing, as the report discusses. But if this option is infeasible or unattractive for whatever reason, financing could potentially be provided by school districts, state governments, and private foundations.

In other words, a school district could decide to begin a pre-K program at a small scale. The district could compare the experience of pre-K students with similar students at schools not offering the expanded program, and monitor the cost savings over time. Cost-savings could be plowed back into sustaining and possibly expanding the program.

Similarly, a private foundation might offer a grant to a school district to invest in an expanded pre-K program for some number of years.  In return, the school district could agree with the foundation on some procedure to estimate cost savings, and agree to put these cost savings back into sustaining or expanding that program over time.

This is an area where a great deal of local experimentation would be helpful. We need to better estimate what these costs savings are over time, and explore a variety of mechanisms of possibly using such cost savings to finance pre-K.  While there is good evidence that high-quality pre-K reduces special education assignments, we know less that we would like about the exact magnitude and timing of such cost-savings. We also have less evidence than we would like on the cost savings for other remedial programs, for example savings in summer school and tutoring programs.

If we can estimate and document specific, large savings in the costs of various remedial programs due to pre-K programs, there will be many options for making the needed investments to realize these cost savings.