Michigan Governor Snyder’s proposal for expanded preschool

Posted on February 8, 2013 by timbartik

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 11th 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.

Posted in Early childhood program design issues, Early childhood programs, Economic development | Comments Off on Michigan Governor Snyder’s proposal for expanded preschool

Link to results of my live chat on school funding and student achievement

Posted on January 31, 2013 by timbartik

I was part of a live online chat today at MLive/Kalamazoo Gazette. The transcript of the chat comments and my responses can be found here.

The chat was based on testimony I recently presented to the Kalamazoo School Board. The testimony argued that in order to overcome the large achievement gap between low-income students and other students, schools would have to receive substantial extra funds per low-income student. I argued that the research evidence indicates that the required extra funds per low-income student would be at least 60%.

I hasten to add that in order to close the achievement gap, these extra funds would have to be use highly productive programs. By “highly productive”, I mean programs that have strong research evidence that they improve student achievement substantially per dollar spent.

Among these highly productive programs is high quality preschool. I argued that by 3rd grade, high-quality preschool for low-income students could close at least one-third of the achievement gap.

Posted in Early childhood programs | 1 Comment

Michigan Radio’s special on pre-K

Posted on January 24, 2013 by timbartik

I was interviewed by reporter Dustin Dwyer for a Michigan Radio special report on preschool that aired today.

The “State of Opportunity” portion of Michigan Radio’s website has an edited transcript and audio of the special, and a guide with links to additional information.

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Yes, there is research supporting benefits of preschool for non-disadvantaged families

Posted on January 16, 2013 by timbartik

A recent article by Melinda Wenner Moyer at Slate got my attention with the following provocative statement:

“Research suggests that preschool only benefits children from… disadvantaged families.”

The article was in the contest of suggesting that affluent New York City parents shouldn’t over-obsess with getting their kids admitted to the “right” preschool. This is probably good advice, but Ms. Moyer overstates her case in her attempt to make her point.

As I have outlined before, there is some good evidence that preschool works for more advantaged children. This includes my work with Bill Gormley and Shirley Adelstein at Georgetown. This research estimates that universal pre-K in Tulsa has similar positive test score effects for middle-class children who are ineligible for lunch subsidies, versus low-income children who are eligible for a free or reduced price lunch.  The test score effects would predict similar dollar effects on these children’s adult earnings prospects, for children from both low-income and middle-class families.

I’ve also previously reviewed other research supporting positive effects of preschool for children from middle-class families.

As I’ve outlined previously, it makes good sense that preschool would provide benefits for children from middle-class families.  Much of the long-run benefits of preschool are believed to arise due to preschool’s effects in boosting “soft skills”: the social skills of getting along with peers and teachers.  A good initial development of these skills builds a child’s self-confidence, and ability to acquire more of these skills later on in K-12.

In the labor market, “soft skills” are at least as important as “hard skills” (whatever reading and math tests measure) in determining success in the labor market.  Most of employer complaints about worker skills are complaints about soft skills.

Upper-class parents shouldn’t obsess about the most prestigious preschool as the route to their child going to Harvard. But an argument against obsessing over preschool prestige should not be over-generalized into a case against benefits of early childhood education for a broad range of children from many income groups.

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There’s nothing new under the Sun

Posted on January 11, 2013 by timbartik

Over the holiday break, and inspired by the movie Lincoln, I read an excellent biography of the well-known Pennsylvania politician Thaddeus Stevens (1792-1868), written by the late Hans Trefousse.

Stevens is best-known as an abolitionist leader and advocate for black civil rights in the U.S. House of Representatives.  But he gained an earlier reputation as an effective advocate for universal free public education in the state of Pennsylvania.

In 1834, the state of Pennsylvania had adopted a system of free, universal “common schools”, to replace the previous system under which everyone paid tuition except for children from poor families.  There was widespread opposition to this new 1834 law. In the 1835 state legislative session, the state Senate voted to repeal the 1834 law, and revert to the previous system of free schools only for “paupers”.  This repeal looked likely to pass the state House.

But on April 11, 1835, state representative Thaddeus Stevens gave a two hour speech against the repeal of universal free common schools. This speech was credited by many contemporary observers with having turned the tide in the public debate, and the existing education bill was maintained (Trefousse, pp. 39-40).  Stevens for the rest of his life preserved a copy of the state education bill printed on silk (Trefousse, p. 40).

In reading this speech, it is startling how today’s debates over universal preschool simply repeat the old debates over universal free common schools. The issues are very similar.  Here are some quotations from this 1835 speech of Thaddeus Stevens.

Why is education a public concern:

“If education is of admitted importance to the people under all forms of government, and of unquestioned necessity when they govern themselves, it follows of course that its cultivation and diffusion is a matter of public concern, and a duty which every government owes to its people… If an elective republic is to endure for any great length of time, every elector must have sufficient information, not only to accumulate wealth and take care of his pecuniary concerns, but to direct wisely the Legislature, the Ambassadors, and the Executive of the nation…If, then, the permanency of our government depends upon such knowledge, it is the duty of government to see that the means of information be diffused to every citizen. This is a sufficient answer to those who deem education a private and not a public duty – who argue that they are willing to educate their own children, but not their neighbor’s children.”

Why it is a mistake to target public subsidies only on children from poor families:

“The amendment which is now proposed…is, in my opinion, of a most hateful and degrading character. It proposes that…the names of those who have the misfortune to be poor men’s children shall be forever preserved, as a distinct class, in the archives of the county. The teacher, too, is to keep in his school a pauper book, and register the names and attendance of poor scholars; thus pointing out and recording their poverty in the midst of their companions. Sir, hereditary distinctions of rank are sufficiently odious, but that which is founded on poverty is infinitely more so. Such a law should be entitled, “An act for branding and marking the poor, so that they may be known from the rich and proud.”

Why it makes as much sense to finance education to reduce crime as to finance the criminal justice system:

“Many complain of the school tax…because it is for the benefit of others and not themselves. This is a mistake. It is for their own benefit, inasmuch as it perpetuates the government and ensures the due administration of the laws under which they live, and by which their lives and property are protected. Why do they not urge the same objection against all other taxes? The industrious, thrifty, rich farmer pays a heavy county tax to support criminal courts, build jails, and pay sheriffs and jail-keepers, and yet probably he never has had and never will have any direct personal use for either. He never gets the worth of his money by being tried for a crime before the court, allowed the privilege of the jail on conviction, or receiving an equivalent from the sheriff or his hangmen officers. He cheerfully pays the tax which is necessary to support and punish convicts, but loudly complains of that which goes to prevent his fellow-being from becoming a criminal, and to obviate the necessity of those humiliating institutions. “

Why children should not be made to suffer for the misfortunes or mistakes of their parents:

“This [universal free public education] law is often objected to because its benefits are shared by the children of the profligate spendthrift equally with those of the most industrious and economical habits. It ought to be remembered that the benefit is bestowed, not upon the erring parents, but the innocent children. Carry out this objection, and you punish children for the crimes or misfortunes of their parents.“

Why higher education rests on the skills provided by earlier education:

“Why has [Pennsylvania], in proportion to her population, scarcely one-third as many collegiate students as…New England? The answer is obvious: She has no free schools. Until she shall have, you may in vain endow college after college; they will never be filled, or filled only by students from other States. In New England free schools plant the seeds and the desire of knowledge in every mind, without regard to the wealth of the parent or the texture of the pupil’s garments. When the seed, thus universally sown, happens to fall on fertile soil, it springs up and is fostered by a generous public, until it produces its glorious fruit. “

Why education helps develop talents among all that then benefit us all:

“If is no uncommon occurrence to see the poor man’s son, thus encouraged by wise legislation, far outstrip and bear off the laurels from the less industrious heirs of wealth. Some of the ablest men of the present and past days never could have been educated except for that benevolent system. Not to mention any of the living, it is well known that the architect of an immortal name [Benjamin Franklin], who “plucked the lightnings from heaven, and the scepter from tyrants,” was the child of free schools.”

Why reform is hard:

“But we are told that this law is unpopular…Has it not always been so with every new reform…? Old habits and old prejudices are hard to be removed from the mind. Every new improvement which has been gradually leading man from the savage through the civilized up to a highly cultivated state, has required the most strenuous and often perilous exertions of the wise and the good.”

Why we need to look beyond the short-term:

“I trust that when we come to act on this question, we shall take lofty ground – look beyond the narrow space which now circumscribes our vision – beyond the passing, fleeting point of time on which we stand – and so cast our votes that the blessing of education shall be conferred on every son of Pennsylvania…so that he may be prepared to …lay on earth a …solid foundation for that enduring knowledge which goes on increasing through…eternity.”

The fight for early childhood education should be seen as a continuation of the long-term struggle for broadening and intensifying the public benefits of education.

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Universal childcare and preschool as a key to improving income mobility

Posted on December 12, 2012 by timbartik

Lane Kenworthy has a great op-ed in the Christian Science Monitor on the need for more government spending on kids.

In this op-ed, he argues that

 “The single most valuable step lawmakers could take [to increase opportunity for children from low-income families] would be to implement universal childcare and preschool.”

Kenworthy makes a concise case that this is needed because of social trends: increased social problems in low-income families, coupled with upper-income parents investing more in preschool education, and all of this taking place in a labor market that values skills more. We can’t easily solve all the problems of low-income families, but we know that high-quality childcare and preschool will help.

Kenworthy points to the experience of Denmark and Sweden, which provide paid family leave after the birth of a child, followed by subsidized child care and preschool, with fees for families capped at 10% of family income.  He argues that in these countries, the evidence suggests that adult success is less dependent on the fortunes of birth.

Finally, Kenworthy argues, similar to arguments I have made in the past, that investing in early childhood programs will help make economic opportunity more equal even if this is financed by broad-based taxes that include all income groups.

Kenworthy’s entire op-ed is well worth reading, as are his various books.

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Right-to-work laws and state economic development strategies

Posted on December 11, 2012 by timbartik

A high-profile issue right now, especially in Michigan, is the effects of state right-to-work laws on state economic development.

As an economic development strategy, the adoption of a state right-to-work law is an uncertain and risky strategy, as I have outlined in several recent interviews.  Proponents argue that right-to-work laws will boost a state’s employment growth. However, the available research suggests that whether this positive growth effect will occur is highly uncertain. In addition, some research suggests right-to-work laws may reduce wages. Therefore, how a state’s earnings per capita will be affected by right-to-work laws is unclear, and the effect may even be negative. As I have argued before, increasing earnings per capita for most of a state or local area’s population is the best approximation to a good bottom-line goal for local economic development effects.

For example,   the study with the strongest methodology that has found positive effects of right-to-work laws on state manufacturing growth is a study by Tom Holmes. But a later study by Kalenkoski and Lacombe that used a similar methodology did not find positive effects of right-to-work laws on manufacturing growth.

Part of the difficulty is that until recently, there has not been much variation over time in which states had right-to-work laws.  Until Indiana adopted right-to-work in 2012, and possibly Michigan as well, the last states to adopt right-to-work were Idaho in 1985 and Oklahoma in 2001. Since World War II, right-to-work laws have mostly been in place in many Southern and some Western states. This limited time series variation in right-to-work laws makes it difficult to come up with precise estimates of the effects of right-to-work laws that can be convincingly separated from other characteristics of these Southern and Western states.

Some studies have tried to use the recent experience of Idaho and Oklahoma to ascertain the effects of right-to-work. A study by Eren and Ozbeklik finds positive effects of right-to-work on the share of the state’s employment in manufacturing in Idaho, but not in Oklahoma.  In neither state was the adoption of right-to-work associated with any change in per-capita-income.  A study by Farber finds significant negative effects of right-to-work on non-union wages in Idaho, but not in Oklahoma. (Non-union wages might be affected due to right-to-work reducing the threat of unionization at non-union firms.) Other studies can be found to dispute these findings. Furthermore, the variation across studies suggests that the right-to-work effect is difficult to estimate precisely in different contexts.  We might not want to assume that the experience of Idaho and Oklahoma can be generalized.

The greater difficulty is that it seems likely that state economic development is determined by more fundamental forces. These fundamental forces dominate or obscure the more minor effects of many other possible influences on state and local economic development such as right-to-work laws.  Even if we restrict ourselves to state economic development policy, there are economic development strategies with far more evidence than right – to – work laws of robust effects on state economic development.

As I have argued before, stronger local economic development can be best achieved by focusing on cost-effective investments in the skills of state residents, combined with targeted policies to reduce the costs of job-creating business investments. Skill improvement policies that have high benefits per dollar include high-quality early childhood programs.  Business job creation can be promoted cost-effectively  by some services for small and medium sized businesses, such as customized job training and manufacturing extension services, as well as by some well-designed and targeted business tax incentives (but not all).

Targeted policies to build skills and to directly promote job-creation have extensive evidence in favor of their economic development benefits. If the goal is stronger state economic development, it is better to rely on policies with strong evidence rather than to rely on policies whose influence is more obscure or perhaps even counter-productive.

Posted in Business incentives, Early childhood programs, Economic development | Comments Off on Right-to-work laws and state economic development strategies

The secret of political success for pre-K programs

Posted on December 5, 2012 by timbartik

Sharon Lerner has an outstanding article in The American Prospect on universal pre-K in Oklahoma. She highlights how Oklahoma has succeeded in providing both access for all and high-quality pre-K services. Ms. Lerner also provides a valuable brief history of Oklahoma’s program, and highlights some details of the program’s operations. (Full disclosure: she briefly mentions at the end some results on long-run earnings effects of Tulsa’s pre-K program that come from my paper with Gormley and Adelstein.)

But what I think is most noteworthy is her description and comments on why universal pre-K has been so politically successful in Oklahoma. Why has this politically conservative state been able to sustain universal access to high-quality preschool?

Part of the political success is the support from having a universal high-quality program. She quotes one school superintendent as saying that “If anyone tried to get rid of pre-K now, they’d get run out of town”.

Therefore, one lesson is that IF pre-K advocates are ever able to successfully implement high-quality preschool for all in a state, it will be much easier to politically sustain the program over time than to initially enact the program.

Ms. Lerner also argues that Oklahoma pre-K is more politically sustainable because pre-K is simply funded as part of overall K-12 funding. Pre-K is funded by the state providing local school districts with similar formula funding per student to how the state funds K-12. Local school districts then provide local property tax funds or federal Title I  funds to cover the remaining operating costs, just as school districts do for the rest of the K-12 system. (Some of this information is derived from research done by Bill Gormley for our article.)

Ms. Lerner argues that

“Building [pre-K’s] cost into the larger public-school funding formula…may be the key difference separating Oklahoma from other states…where pre-K funding was slashed during the recent recession…Pre-K is…just another grade – as unlikely to be singled out as 5th or 11th.”

I suspect this argument is true. Pre-K is more likely to be steadily funded if it is defined as part of the needed educational package for all students. This politically normalizes pre-K as a service. In addition, by including pre-K in overall K-12 funding, pre-K attracts the lobbying power of various K-12 interest groups.

However, this political argument raises two other concerns.

First, many K-12 advocates may be concerned that if pre-K is simply incorporated into K-12 funding, that local school districts will be given a mandate to provide additional services without necessarily having access to additional funding. For example, I know this is a concern in Michigan. There are currently rumored proposals in Michigan to expand pre-K funding that apparently propose to take the extra funding out of the state’s School Aid Fund, without any measures to increase revenue going into the fund. Because the state of Michigan in recent years has already made cuts in real state funding per K-12 student, and because Michigan school districts are generally forbidden to increase operating funding using local funds, the additional burden of expanded pre-K funding on local school districts is a legitimate concern.

Second, if pre-K is simply run through local school districts, many private preschool operators may be concerned that universal pre-K will drive them out of business.  Oklahoma seems to have avoided these problems, perhaps in part because the state had less of a pre-existing network of private preschool providers, and in part because school districts in Oklahoma apparently frequently contract out preschool services.

These concerns about funding pre-K through the state K-12 budget suggest two important strategies. First, pre-K advocates may need to link up with K-12 interest groups to push for measures to expand overall educational funding. Second, pre-K advocates and K-12 interest groups may need to think how expanded state funding for pre-K can somehow incorporate high-quality private providers as well as pre-K directly operated by local school districts.

In other words, successful political advocacy for pre-K requires a broad coalition, which ideally will include support from both K-12 interest groups and private preschool providers.

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All business incentives are not created equal

Posted on December 4, 2012 by timbartik

Kenneth Thomas has a useful blog post pointing out that the New York Times database on business incentives, which accompanies Louise Story’s series, includes sales tax exemptions for business purchases of goods and services.

Thomas’s figures, which are consistent with my own rough preliminary analysis of this database, is that around $52 billion of the approximately $80 billion in identified state and local business incentives are in “sales tax relief”. Much of this appears to be exemptions for business purchases of inputs.

For example, in my own state of Michigan, the New York Times database identifies $6.65 billion in annual state and local business incentives. Of this total, $4.83 billion is in “sales tax refund, exemptions, or other sales tax discounts”.  Of this $4.83 billion, almost all of these refunds come from two provisions of Michigan tax law. First, Michigan does not apply the sales tax to most services, including business services, which saves businesses $3.88 billion annually. Second, for manufacturing, Michigan does not apply the sales tax to goods used as inputs to the manufacturing process, which saves manufacturers about $0.92 billion in sales tax.

Most public finance economists would agree that the sales tax should NOT be applied to business purchase of inputs, whether they are goods or services. Why? If we apply the sales tax to business purchase of inputs, this discriminates in favor of vertically integrated firms, and against firm’s contracting out to have some of their needed inputs be produced by other firms. A firm that purchases inputs from some supplier, which may in turn purchase inputs from other suppliers, will find that the sales tax pyramids with each level of additional purchase. A firm can reduce its sales tax bill by acquiring its supplier, that is by “vertically integrating”. There is no public policy rationale for encouraging such vertical integration. Presumably firms that buy inputs from other firms do so because they find this to be a more efficient way of organizing production. In addition, by encouraging vertical integration, we are discriminating in favor of larger businesses, and against smaller businesses, which will tend to be less vertically integrated.

This illustrates a more general point. Many business incentives are wasteful use of resources, in that they have benefits less than their costs, when compared with other uses of these funds, such as early childhood programs. Other business incentives make sense, and should be part of a well-designed state and local fiscal system.

For example, I have argued that customized business services, such as manufacturing extension programs, and customized job training programs, can be a cost-effective way of increasing the earnings per capita of state residents.

On the other hand, other policies which benefit businesses, but may not be classified as “business incentives”, may not be cost-effective policies for creating jobs. For example, I have argued that estimates suggest that in many states, across-the-board business tax cuts will not be the most cost-effective way of creating jobs. Across-the-board cuts in business tax rates would usually not be classified as business incentives, because they provide uniform tax relief to all businesses. But the lack of targeting, while it may have some political and philosophical merits, may also make such across-the-board tax cuts less effective as a way of creating jobs.

All business incentives are not equally good or bad from a public policy perspective. We need a balanced use of business incentives that are smart and cost-effective, coupled with selective investments in human capital that will also boost the state economy in a cost-effective way.

Posted in Business incentives, Economic development, Incentive design issues | 2 Comments

Film production incentives as economic development policy: why are they problematic?

Posted on December 4, 2012 by timbartik

Louise Story’s series in the New York Times on state and local business incentives concludes with an article (December 4, 2012) on film subsidies, highlighting Michigan’s experience.

Why are film production incentives so problematic as economic development policy? I wrote on this topic back when I started this blog, in December 2010.

The biggest problem with film production incentives as economic development programs is that even when they “work”, in the sense that they produce new film production activity in a state, the benefits for state residents tend to be meager. The jobs produced are often temporary and low-wage.

In addition, as Ms. Story’s article outlines, the jobs are also mostly dependent on a continuation of ongoing large state operating subsidies for film production. Therefore, unlike some incentives, which might provide a short-term incentive for capital investment, film production incentives seem to need to be ongoing to be effective. This raises their costs significantly.

The reality is that a state can make almost any industry “competitive” in a state economy if it provides an ongoing subsidy of 30% to 42% of its labor costs, as Michigan at one time did with films. But this strategy has huge costs per job created. There is no way a state can afford to do this for all jobs, or even all jobs in “export-base” industries.

As I have outlined before, sensible state business incentive policy is highly targeted on policies that are cost-effective in creating good jobs.

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