On February 7, Michigan Governor Rick Snyder released his state budget proposal, which included a significant proposed expansion of state-funded preschool. This preschool proposal recommends expanding the state’s preschool funding from $109 million in fiscal year 2013, to $174 million in fiscal year 2014, and $239 million in fiscal year 2015.

Under this proposal, my projection is that the percentage of the state’s four-year-olds in state-funded preschool will increase from a current level of about 20% of all four-year olds to a level two years from now of about 42%. This would rank the state about 11^th among all states in percentage of students in state-funded pre-K.

However, Michigan would still be well short of the leading states. Oklahoma, for example, has 74% of its four-year olds in state-funded pre-K. When combined with Head Start funding, Oklahoma essentially does have universal access to pre-K.

Michigan would come close to universal access for the income group targeted by the state’s pre-K program, which is families below 300% of the poverty line. But some children in that group will still not have access to pre-K, and the program would not expand access for groups beyond that income level.

The proposal would also increase the state funding per half-day slot from $3400 to $3625, a 6% increase. This increase is after a long period in which the state per slot funding has been little changed. The state per slot funding last increased, from $3300 to $3400, for the 2007-2008 school year.  Before that, the state funding has stayed at $3300 from 2000-2001 until the 2007-08 increase.  In real terms, the $3300 per slot funding in 2000-2001 would be equivalent to $4400 in today’s dollars, and the $3400 per slot funding in 2007-08 would be equivalent to $3765 today.

More importantly, high-quality preschool costs a lot more than $3400 or $3625 for a half-day slot. I have estimated, using information from the Institute for Women’s Policy Research (see their publication “Meaningful Investments in Pre-K” ) that a half-day quality pre-K slot probably costs at least $4500. (For example, $4498 would be the 2012 cost of a three-hour school-year program if the class size ratio is 17 students to 2 teachers, and if teachers are paid at typical wages for pre-K teachers with a bachelor’s degree; paying public school wages ups costs to $4990.)

Therefore, even with the increased per slot funding, providing high-quality pre-K will require local school districts to provide considerable cross-subsidy. And the private providers who are included in the program will have to somehow cross-subsidize the program through contributions or the willingness of dedicated employees to work for low pay.

The proposal also funds the preschool expansion out of the state’s School Aid Fund. For readers not familiar with Michigan’s K-12 funding, Michigan has a very state-centric funding system for K-12. Essentially the state controls the level of operating funding per child. School districts provide some funds via capped property taxes that cannot be changed, and the state makes up the difference between that amount and a certain amount of “foundation grant” funding per student.

For next year, the Governor’s budget proposes a foundation grant and other aid that in nominal terms shows little or no increases in per student funding for most school districts. This of course means some drop in real funding per student for most school districts. This is after a 10 year period in which Michigan’s K-12 system has seen significant drops in real per student funding.

The problems in K-12 financing have three implications for Governor Snyder’s preschool initiative.  First, the fiscal stresses facing K-12 schools mean that even with the preschool funding increase in the proposal, some school districts will find it difficult to provide the needed cross-subsidies to ensure a quality preschool program.

Second, the K-12 funding problems will to some extent undercut preschool’s projected future benefits for improving the skills of the Michigan labor force and thereby the Michigan economy. In my book, Investing in Kids, chapter 7 includes some calculations of the consequences of financing preschool investments by reduced K-12 funding.  I calculated that such financing reduced the state economic benefits of preschool investments by about two-fifths.  If our goal is to maximize the future economic potential of the state, other financing mechanisms (e.g., broadening the base of the state sales tax) would be preferable.

Third, funding expanded preschool out of the School Aid Fund potentially puts preschool advocates and K-12 advocates into political competition. This may create some political problems for the proposal in the state legislature.

As I’ve said in interviews both on Michigan Radio, and on our local public radio station, WMUK, Governor Snyder’s proposal is a significant step forward towards expanding the availability and quality of preschool in Michigan. But it is definitely “half a loaf”.  Half a loaf is better than none, as the old saying goes. We need to take that first step forward, but then follow that first step with further steps. To fully realize the state economic development benefits of preschool, we need to further expand its availability, provide the needed funding per student to ensure that the preschool is high-quality, and combine expanded investment in preschool with expanded investment in K-12 education.