Philosophical objections to early childhood programs, part 1: are early childhood programs like “Brave New World”?

Posted on March 8, 2011 by timbartik

Some objections to early childhood programs are not based on comparing these programs’ costs with benefits. Instead, these objections are a matter of principle. In chapter 11 of Investing in Kids, I consider some of these objections.

Some opponents of early childhood programs have a visceral feeling that early childhood programs involve the government crossing a line that should not be crossed.  For example, a philosophical objection to early childhood programs has been raised by Darcy Olsen, President and CEO of the Goldwater Institute in Arizona. I quote from a transcript of remarks that Ms. Olsen made in 2005:

“Abecedarian and…[the Chicago Child-Parent Centers] provide pretty good evidence that the right kinds of interventions…can change outcomes….The question then, for policymakers…is whether that is a level of intervention that parents are comfortable with and, certainly, that is one of the reasons that I believe the state needs to stay far away from this. It reminds me a little bit of Brave New World, where babies are assigned to different categories and they know they can produce certain outcomes…You can change outcomes, but who should be in the position of determining what those outcomes should be and who need[s] to be changed?”

What can be said in response to this philosophical objection? First, I think that most early childhood programs are a long way from government dictatorial control over the fortunes of individual children. A half-day of preschool during the school year at age 4 is not the same as Brave New World. Early childhood programs are voluntary, allowing for parent choice.

Second, many early childhood programs empower parents. For example, the Nurse Family Partnership involves nurse home visitors helping disadvantaged first-time mothers to be stronger parents.

Third, program design can address some concerns about excessive government control. Having more local control may allay concerns about excessive federal government involvement. At the local level, a variety of local designs and settings for preschool and other early childhood programs can provide more parental choice.

It may be true that the road to hell is paved with good intentions. On the other hand, so is the road to heaven. If we seek to empower parents, and facilitate parental choice, we can help strengthen American families with high-quality early childhood programs.

Posted in Early childhood program design issues, Early childhood programs | Comments Off on Philosophical objections to early childhood programs, part 1: are early childhood programs like “Brave New World”?

One key point about evaluation

Posted on March 7, 2011 by timbartik

The National Institute for Early Education has recently published a useful report on evaluation for early education programs. The report is entitled “Improving Early Education Programs through Data-based Decision Making”. Its authors are Shannon Riley-Ayers, Ellen Frede, Steve Barnett, and Kimberly Brenneman.

The report provides an extensive description of various evaluation designs. These various designs include randomized experimentation, regression discontinuity, and nonequivalent comparison groups. The report includes discussion of the pros and cons of each design. In addition, the report includes a discussion of the costs of different types of evaluation. Finally, an appendix discusses different possible student tests to use in evaluation.

Over the years, I have written extensively on how to evaluate business incentives and other economic development programs. My new book, Investing in Kids, includes extensive discussion of evaluation of early childhood programs and business incentive programs.

Out of all this verbiage in reports and books, what is the most important point? What about evaluation is it most important for policymakers and early childhood advocates to understand?

My choice for a key point is this:  not all evaluations are created equal. In fact, evaluation quality is extremely unequal. One evaluation with a good design trumps 50 evaluations with a mediocre design.

More specifically, an evaluation with a comparison group that is truly comparable is far more reliable than 50 evaluations with more usual comparison groups. A very common evaluation design is to compare what happens to participants in early childhood programs with what happens to non-participants. This is usually a mediocre evaluation design. Much better are evaluation designs that yield better comparison groups by random assignment or by techniques such as regression discontinuity.

For early childhood programs, the problem with the usual comparison groups can be labeled with the jargon “selection bias”.  There is some reason that some children were selected either by parents or by the programs into participating in early childhood programs. Frequently, children who are thought for some reason by early childhood programs to be “needier” are selected into early childhood programs. These program participants will not be comparable to children who do not participate in the program.  Program participants and non-participants will remain non-comparable even if the research study tries to statistically control for as many characteristics of the children or their families as possible.

The consequence of this non-comparability is that estimates of program effects will be biased. If program participants are needier, then over time they will tend to do worse than non-participants. This causes a negative bias in estimated effects of the early childhood program. The estimated effects will be less than any true positive effects of the program, and even may be negative. This negative bias may tend to increase over time. Over time, if program participants are needier, any negative effects of program participants’ social environment will tend to have larger cumulative effects on outcomes. The initial estimated positive effects will appear to fade over time even if there were no true fading of program effects.

For evaluations to be reliable, the comparison group has to be truly comparable to the program participants. This requires that the comparison group’s non-participation has to be due to some factor that has no relationship to expected child outcomes.  Random assignment is one such factor: program participation vs. non-participation is due to some random number that is generated.

Regression discontinuity is another such method that yields good comparison groups. In the case of pre-k programs, we compare children of various ages who either are just entering the pre-k program, or who participated in the program the previous year and are now entering kindergarten. Selection bias is not an issue because all these children were selected by families and the program for participation in the pre-k program. Whether the children are just entering the program, or are through the program and are entering kindergarten, is due solely to where their birthdays fall relative to the age cut-off for the pre-k program. Age by itself also has some effects on student outcomes. But we can control for age’s gradual effects on student performance. The abrupt shift in performance at the age cutoff is most plausibly due to the fact that children who were slightly older than the age cut-off a year ago ended up participating in the program for one year, whereas children who were slightly younger than the age cut-off a year ago were not able to participate until this year.  The recent NIEER publication provides a useful diagram to illustrate these ideas in Appendix C.

Regression discontinuity is relatively straightforward to do. It does require policymakers to do one thing that no doubt seems a little weird: give the same tests at pre-k entrance that are given at kindergarten entrance. To allow for the comparison between the two groups, the outcome measures must be the same.

One big advantage of regression discontinuity is that it can be done on an ongoing basis for program evaluation of pre-k programs. A state or local area that wants to monitor performance of a pre-k program simply has to regularly collect data on the same tests at pre-k entrance and kindergarten entrance for participants in the pre-k program. This allows the effects of the pre-k program on kindergarten readiness to be measured. Policymakers can compare the effectiveness of different pre-k program designs or curricula to see which works better with different groups of children.

I should emphasize that such evaluations do not need to look solely at “hard skills” (e.g., the skills measured by literacy and math tests). A regression discontinuity evaluation can also look at program effects on “soft skills” (e.g., various skills related to social skills and character skills).

There are other ways of getting comparison groups that are truly comparable. Comparing siblings who participated in early childhood programs with siblings who did not participate in early childhood programs controls for unobserved family factors that may affect child outcomes.  (See, for example, papers on Head Start by David Deming, and Janet Currie and Duncan Thomas.)  Sometimes comparisons across geographic areas in program participation can be used, if there are good reasons to think that the differences across geographic areas would not have independent effects upon child outcomes.

However, the key point is this: some evaluations are much more reliable than others. In reaching conclusions about the effects of early childhood programs, we should rely far more heavily on these rigorous evaluations rather than the non-rigorous evaluations. In designing evaluations for ongoing program improvement, we should plan for evaluations that will give us reliable conclusions.

The reliability of the evaluations is why researchers on early childhood programs place so much emphasis on the long-term evaluation results from the Perry Preschool Program, the Abecedarian Program, the Nurse Family Partnership Program, and the Chicago Child-Parent Center Program. These programs have truly comparable comparison groups. And it is the reason why researchers place so much emphasis on the regression discontinuity results on pre-k programs from Oklahoma and other states. Even if people are tired of hearing about these studies, their results are so much more reliable than most other evaluations that they still deserve special emphasis.

Posted in Early childhood programs | Comments Off on One key point about evaluation

Kevin Drum on Professor Heckman’s work: some comments

Posted on March 4, 2011 by timbartik

Well-known Mother Jones blogger Kevin Drum has some comments on early childhood programs. His comments are largely based on his reading of Nobel prize-winning economist James Heckman’s work. (Full disclosure: Professor Heckman has provided a quite positive blurb for my book Investing in Kids).

Kevin Drum interprets Professor Heckman’s work as saying that “Roughly speaking, nothing we do after age three has much effect”. (This is quoting Drum’s interpretation of Heckman, not Heckman.)  Kevin Drum goes on to say the following:

“Heckman isn’t calling for an end to efforts to improve education, and neither am I. But both of us are skeptical about the flavor-of-the-month “reforms” that pop up periodically, are endorsed unanimously by the great and good, and then disappear within a few years to be replaced by some new silver bullet—and always without producing any scalable, practical, long-lasting results.”

“Intensive, early interventions, by contrast, genuinely seem to work. They aren’t cheap, and they aren’t easy. And they don’t necessarily boost IQ scores or get kids into Harvard. But they produce children who learn better, develop critical life skills, have fewer problems in childhood and adolescence, commit fewer crimes, earn more money, and just generally live happier, stabler, more productive lives. If we spent $50 billion less on K-12 education—in both public and private money—and instead spent $50 billion more on early intervention programs, we’d almost certainly get a way bigger bang for the buck.”

What should be said about this commentary?

First, the position that “nothing we do after age three has much effect” is vastly overstated, even “roughly speaking”.  As extensively discussed on this blog and in my book Investing in Kids, high-quality pre-k at age 4 has a very high benefit-cost ratio. The benefit-cost ratio of pre-k at age 4 is larger than for some intervention at earlier ages. “The earlier the better” is only partially true.

In addition, there are a variety of later interventions that work. We know that lower class-size from kindergarten through grade 3 works, from the Tennessee Class-Size study.

Beyond grade 3, I think it is true that interventions have to become more targeted and more attuned to the individual and to the labor market. But even here, there are actually quite healthy returns to many well-run school reform programs and to well-run job training programs. For example, there is good evidence that Career Academies work in high school.  There is good evidence for the effectiveness of some summer school programs. Job training programs with close ties to employers can be quite effective.

More broadly, the evidence that teaching quality matters is overwhelming. And there is significant evidence that more teaching time matters. If we can figure out how to reform schools to improve teaching quality and time on task, student achievement could be increased significantly. Kevin Drum is right that this is difficult to do. But I’m not as pessimistic as he is about the potential for such reforms.

Second, the notion that early interventions always have to be “intensive” and “aren’t easy” is somewhat overstated. As I have outlined in earlier posts, the benefit-cost ratio actually appears to be somewhat higher for one-year (at age 4) of half-day pre-k during the school year than it is for going to a full day or going to two years of preschool. More intensive programs do not always have a higher benefit-cost ratio.

In addition, I think that while high-quality pre-k programs, or a high quality Nurse Family Partnership program, are not cheap, they are not necessarily unduly difficult to run. The evidence suggests that a typical state or school district can figure out how to run an effective pre-k program.  You have to spend enough to have reasonable class sizes and to attract and retain good teachers. But it does not require extraordinary abilities at program management.

Third, I agree with Kevin Drum that the average ”bang for the buck” (benefit-cost ratio) is higher for some early childhood investments than for many investments in K-12 education.  In chapter 7 of Investing in Kids, I make this comparison.  I conclude that the benefit-cost ratio of universal pre-k is roughly two-and-a-half times the benefit-cost ratio of lower elementary school class size.

However, this does not mean that investments in K-12 education don’t pass a benefit-cost test. Kevin Drum is probably right that reallocating $50 billion from K-12 education to high-quality early childhood interventions would produce net economic and social benefits.  However, we would get greater economic and social returns from financing investments in early childhood programs in some other way. There are investments in K-12 education that also have benefit-cost ratios greater than one, although early childhood investments do better.  Increased taxes would be one better alternative to financing increased early childhood investments. Alternatively, there are other government spending programs that are less productive than both early childhood programs and K-12 education.

Posted in Early childhood programs | Comments Off on Kevin Drum on Professor Heckman’s work: some comments

Fed Chairman Bernanke makes strong statement on need for early childhood education, even in a time of state and local fiscal challenges

Posted on March 3, 2011 by timbartik

The chairman of the Federal Reserve Board, Ben Bernanke, made a strong statement last night on the need for early childhood education. His statement was made in a speech to the Citizens Budget Commission of New York. Dr. Bernanke made his statement as part of a speech discussing the budget challenges facing state and local governments.

While acknowledging the need for budget balancing, Dr. Bernanke went on to argue that one of the key state and local budget issues is how to foster economic growth. Further, one of the best ways to do so is to invest in early childhood education. The full text of the speech is here. The key portion of the speech relative to early childhood education is as follows:

“In the long run,… the most important fiscal issue is whether the structure and composition of the government budget best serves the public interest. Certainly, most people would support the goal of fostering healthy economic growth. Government can contribute to this objective in a number of ways. One critical means is by ensuring an adequate investment in human capital–that is, in the knowledge and skills of our people. No economy can succeed without a high-quality workforce, particularly in an age of globalization and technical change. Cost-effective K-12 and post-secondary schooling are crucial to building a better workforce, but they are only part of the story. Research increasingly has shown the benefits of early childhood education and efforts to promote the lifelong acquisition of skills for both individuals and the economy as a whole. The payoffs of early childhood programs can be especially high. For instance, preschool programs for disadvantaged children have been shown to increase high school graduation rates. Because high school graduates have higher earnings, pay more taxes, and are less likely to use public health programs, investing in such programs can pay off even from the narrow perspective of state budgets; of course, the returns to the overall economy and to the individuals themselves are much greater. “

Obviously Dr. Bernanke’s message supports the arguments being made in state capitals by many early childhood advocates. His message is entirely consistent with the data and research provided by my book Investing in Kids: any serious state and local economic development strategy must include high-quality investments in early childhood programs.

Dr. Bernanke’s support indicates that high-quality early childhood programs are viewed as important by  relatively conservative economists concerned with long-run economic growth.  Dr. Bernanke previously served as chair of the President’s Council of Economic Advisers under President George W. Bush.

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The pros and cons of federal involvement in early childhood programs

Posted on March 2, 2011 by timbartik

An earlier post compared the state perspective on early childhood programs with the national perspective. National economic development benefits of early childhood programs considerably exceed state benefits. This conclusion applies to three types of early childhood programs: high-quality universal pre-k; full-time child care and preschool programs similar to the Educare program sponsored by the Ounce of Prevention Fund and the Buffett Early Childhood Fund; the Nurse Family Partnership.

If a state invests in early childhood programs, how large are the benefits that occur outside the state? Such “external benefits” are large enough to rationalize considerable federal subsidies. These federal subsidies would be over 100% of the costs for universal pre-k. External benefits are sufficient to rationalize federal subsidies of over 75% of costs for Educare-style programs. External benefits are sufficient to rationalize federal subsidies of over 60% of costs for the Nurse Family Partnership.

On the other hand, the “own-state” benefits from these programs are sufficient that states have plenty of incentive to invest in these programs with their own dollars, without any federal subsidy. The ratio of state economic development benefits to costs is 2.78 for universal pre-k. The ratio of own-state benefits to costs is 2.25 for Educare-style programs. The ratio of own-state benefits to costs is 1.85 for the Nurse Family Partnership.

At some point, perhaps investment in early childhood programs will be so extensive that we will reach diminishing returns.  At that point, further investments may make sense from a national perspective, but not a state perspective. Federal subsidies would be clearly necessary to ensure adequate investment. At present, however, we are so short of needed investment levels in early childhood programs that the programs have large pay-offs even when we ignore the benefits for those who participate in early childhood programs in one state, but end up spending their working career in some other state.

So, extensive federal subsidies to early childhood programs make sense from a “policy wonk” perspective, but logically should not be needed to rationalize state investment in early childhood programs. Are there any negative features of federal involvement in early childhood programs that might be of concern? One concern might be that federal involvement could inhibit needed flexibility and improvement. Although we know some things about what makes for good early childhood programs, in terms of appropriate class size, curriculum, and teacher training, there is much that we do not know. There are benefits to experimenting with a wide variety of approaches. It is reasonable to be concerned that a dominant federal role might inhibit some innovative state and local early childhood programs.

One possibility is to circumscribe the federal role so that it focuses only on limited areas. A circumscribed federal role is less likely to inhibit state and local innovation.

A federal role in a particular area of early childhood programs makes the most sense when national benefits are likely to be particularly large relative to state benefits. One such area is evaluation. Early childhood programs throughout the nation benefit when we obtain better information on what program designs work better to improve student skills.  High-quality evaluation can be expensive, which discourages adequate investment in evaluation by states acting on their own. In addition, some state and local government agencies may be hesitant to do rigorous evaluations of their own early childhood programs, out of fear that the results may be negative. Federal financing and standards for high-quality early childhood evaluation may be helpful.

Such evaluation should include both “hard skills” (e.g., what is measured by literacy and math tests) and “soft skills” (e.g., social skills). A variety of rigorous methods are available for evaluating early childhood programs. For example, a recent publication by the National Institute for Early Education Research provides a useful guide to potential evaluation methods for early childhood programs.

A federal role may also be useful in establishing standards and helping finance staff education and staff training for early childhood programs. There would be national benefits for having more uniform credentials and standards for early childhood staff. (A recent paper on teacher preparation for pre-k has been published by the New America Foundation.)

Finally, one possible circumscribed federal role might be to pay for infrastructure costs for new or rehabilitated early childhood program facilities. Such infrastructure costs, annualized over the lifespan of the facility, might be about 10% of total early childhood program costs, based on data from the Institute from Women’s Policy Research (Report number G718, “Meaningful Investments in Pre-K: Estimating the Per-Child Costs of Quality Programs”.)

Federal support for evaluation, staff education and training, and building infrastructure would help financially support early childhood programs while also encouraging improvement in program quality. However, because such support would avoid direct operating support, such federal support is less likely to inhibit needed program innovation. In fact, the support for evaluation would help ensure that the true effects of any innovation were measured. It is common to praise state and local governments as being “laboratories of democracy”. But if no one measures the results of such laboratories, such state and local experimentation does not lead to long-lasting program learning and improvements.

A more detailed discussion of possible federal roles in early childhood programs is in chapter 10 of Investing in Kids.

Posted in Early childhood programs, National vs. state vs. local | 1 Comment

Reforming business incentives: possibilities for state and local reforms

Posted on March 1, 2011 by timbartik

As a series of posts have outlined, many state and local business tax incentives have national benefits less than their costs. A federal policy to restrain such business tax incentives would be in the national interest. However, such a federal policy seems unlikely, at least in today’s political climate.

If federal action is unlikely, are there policies for state and local reforms to improve business incentive policy? This issue is discussed in chapter 10 of Investing in Kids.

In all state and local areas, it makes sense to urge that business tax incentives be incorporated into the regular business tax system. This does not mean substituting across-the-board business tax rate cuts for business tax incentives. Such across-the-board business tax cuts usually would be less cost-effective than business tax incentives. What it means is making a business tax incentive for a job-creating investment into something a business receives under normal tax law rather than as a discretionary award.

By incorporating business tax incentives into the regular tax code, the political system will have to take greater account of their overall cost. In contrast, discretionary business tax incentives are often sold as being restricted to a few extraordinary cases. However, once business tax incentives are given to a few businesses, it becomes politically impossible to avoid granting such incentives to other businesses in similar circumstances. It is far better to recognize this reality from the outset, and realistically budget for the true cost of business tax incentives.

All state and local areas should consider replacing some of their business tax incentives with customized services to business. Such customized services include customized job training and manufacturing extension services.  The empirical evidence suggests such customized services have benefit/cost ratios that can be over ten times as great as the benefit/cost ratios for even well-designed business tax incentives. State and local areas can provide a greater boost to their state or local economy at lower cost through greater reliance on such customized business services.

For state and local areas that already have healthy growth, the evidence suggests that business tax incentives’ local benefits are less than costs. Fast-growing local areas should be thinking about ways to develop their local labor force to fill the new jobs, not about how to further accelerate job growth. If a state has some slow-growth areas within a generally fast-growing state, business tax incentives should be restricted to these lagging areas.

Many advocates of reforms to state and local business incentives believe that such reforms will be promoted if business tax incentives are more “transparent”. Greater transparency means that more information is available to the public on what incentives are offered to what businesses, and on the outcomes of incentive deals.  This greater transparency will yield public pressure to help restrain the magnitude of incentives.  According to LeRoy (2004, 2007), twelve states have already enacted reforms to increase the transparency of economic development incentives.

More and better evaluation of business incentives is also politically helpful. For business tax incentives, it is often difficult to tell whether a given business tax incentive was decisive in inducing a particular business location decisions. However, it is possible to evaluate the consequences of business location decisions in terms of greater state or local earnings per capita and fiscal benefits (or costs) for state and local budgets.  Good evaluations are likely to find many cases where for the business tax incentive program to pay off, an unrealistic proportion of business location decisions would have to be tipped by the incentive program.

For business incentives that are services to individual businesses, it is feasible to evaluate such programs by comparing the performance of assisted businesses with similar unassisted businesses. Past studies suggest such customized services are more cost-effective than many business tax incentives. Therefore, better evaluation is likely to strengthen the political fortunes of customized services.

An overall reform of business incentives towards greater reliance on customized services rather than tax incentives is likely to be advantageous for several reasons. First, as mentioned before, such customized services are more cost-effective. Second, because customized services are financed through the appropriations process, rather than through the tax system, they are likely to be subject to more regular close scrutiny by legislative bodies.  Third, customized services will only be demanded by businesses to the extent to which such services are useful and productive. In contrast, there is an unlimited demand by businesses for business tax incentives.

It is common to urge advocates of investment in human capital, such as advocates for investment in early childhood programs, K-12, or higher education, to recognize the importance of reforms to make sure that such investment dollars are used wisely. An analogous argument can be used for business incentives. Our business incentive dollars should be used wisely.  Such wise use requires: transparency in business incentive practices; rigorous evaluation; full accounting of all costs as part of the tax system and appropriations process; shifting towards a greater reliance on customized services rather than less-efficient business tax incentives.  Rather than pushing for abolishing business incentives, we should be pushing for reforms to make incentives more effective in achieving economic development benefits.  Higher-quality business incentives, along with high-quality early childhood programs and other well-designed human capital investments, should be part of a comprehensive local economic development strategy.

Posted in Business incentives, Incentive design issues, National vs. state vs. local | Comments Off on Reforming business incentives: possibilities for state and local reforms

Finding my blog

Posted on February 28, 2011 by timbartik

For some reason, Google’s search algorithm no longer seems to find this blog very easily. I suspect this has something to do with the recent change in their search algorithm. My best guess is that for some reason, Google has mistakenly classified this blog as a “content farmer” website, which “scrapes” content from other websites.  Obviously this is a mistake, as all content here is original.

I am looking into what, if anything, can be done to correct this problem. In the interim, this blog can be found more easily through searches on Bing or Yahoo. Unfortunately, Google still has almost an 80% market share in the search engine market.

In addition, I would appreciate my subscribers’ efforts to share my posts via email, Facebook, etc. Or, if you have a website for which this would be appropriate, a link to this blog would be helpful.

Posted in Uncategorized | Comments Off on Finding my blog

Federal policy towards business incentives

Posted on February 28, 2011 by timbartik

Several posts have identified some problems with business incentives’ national benefits.  Business tax incentives in average- growth or fast-growth local areas are likely to have national benefits that are less than costs.

On the other hand, business tax incentives in slow-growth areas may have net national social and economic benefits, by better utilizing unemployed labor and existing infrastructure. Business incentives that efficiently improve productivity through customized business services (such as customized job training or manufacturing extension services) may also have net national benefits.

This analysis suggests a natural federal policy: a federal prohibition on large business tax incentives except in distressed areas.  I suggest that the prohibition apply to business tax incentives that are awarded with some discretion to individual businesses. The prohibition would also include state business tax laws that discriminate in favor of “export-base” businesses, which are businesses that sell their goods or services outside the state.

Federal policy should permit business tax incentives in economically distressed areas. Federal policy should also permit customized services that help small and medium sized businesses to improve their productivity.

As discussed in chapter 10 of Investing in Kids, such federal policy would have a precedent in the European Union. It is interesting that the European Union puts more constraints on what member countries can do in economic development incentives than the U.S. federal government does for U.S. states. The EU considers business tax incentives or service incentives to individual business to be a type of subsidy to exports.  In the EU view, such export subsidies must be limited to be consistent with free trade among the member countries.

In the EU, in general subsidies by member counties to individual businesses are outlawed. The exceptions are subsidies that promote EU objectives. These EU objectives include helping distressed areas designated by the EU. Other EU objectives include assisting small business, increasing R&D, and promoting job training.

If a subsidy is found to be illegal, the assisted business is required to repay the subsidy. Complaints to the EU can be levied by other member countries or by other businesses.  More information on EU handling of business subsidies can be found in an informative 2004 article by Adinda Sinnaeve, later published in the 2007 book Reining in the Competition for Capital, edited by Ann Markusen.

As argued by Art Rolnick and Melvin Burstein of the Minneapolis Fed, federal regulation of state business incentives can be seen as part of the federal government’s authority to regulate interstate commerce. Our federal constitution was originally set up in part to address problems due to the Articles of Confederation, under which some states were imposing import duties on goods imported from other states. Import duties distort the pattern of interstate trade by making imports from other states more costly, whereas business incentives distort trade by making exports to other states artificially cheaper.

Federal regulation of business incentives might free up considerable state and local government resources. Total resources devoted to state and local business incentives are probably at least $30 billion per year. Most of these dollars go to tax incentives that do not target economically distressed areas.

If business incentives were better regulated by the federal government, the resulting additional state and local resources would be sufficient to accomplish a wide variety of goals, including significantly expanding early childhood programs. For example, the estimated costs of universal pre-k are about $14 billion, slightly less than half the cost of current business incentives.  We could keep more efficient business incentives while diverting the less efficient incentives towards other programs that would better help accomplish economic development objectives, such as early childhood programs.

Whether the federal government is willing to regulate such business incentives is questionable, at least in the current political climate. For example, in 2004, a federal appeals court decision temporarily raised doubts about the constitutionality of some state business tax incentives.  This federal appeals court decision was later overturned by the Supreme Court on the grounds that the plaintiffs lacked standing. But before the decision was overturned, legislation to negate the federal appeals court decision was endorsed by the National Association of Manufacturers, the National Governors Association, and the U.S. Conference of Mayors.

If the federal government refuses to regulate business incentives, are there any alternatives to reduce inefficient business incentives? A subsequent post will consider that issue.

Posted in Business incentives, National vs. state vs. local | 1 Comment

Kalamazoo event highlights the potential of business support for investing in kids

Posted on February 25, 2011 by timbartik

On Thursday, February 24, I spoke at an event in Kalamazoo about my book Investing in Kids. This “book signing” event was cosponsored by the Kalamazoo community group ISAAC, the Greater Kalamazoo United Way, and the Kalamazoo Great Start Collaborative. I appreciate their efforts to organize and publicize this event.

Julie Mack of the Kalamazoo Gazette has written an article about the event. Local radio station WKZO has a short video of part of the event.

What was most interesting to me about the event was that it showed the strength of local business support in Kalamazoo for early childhood education. Short statements in support of early childhood programs were made by Steward Sandstrom, CEO of the Kalamazoo Regional Chamber of Commerce, Kathy Jones of PNC Bank, and Jim McIntyre, president of the Rotary Club of Kalamazoo.

As Steward Sandstrom highlighted, local business leaders in Kalamazoo and elsewhere have a long history of supporting educational enhancements that they believe will improve the community. Steward Sandstrom pointed to the business community’s efforts many years ago to convince the state to locate the institution that became Western Michigan University in the Kalamazoo area.

What is needed is to convince the business community that early childhood education is a cost-effective way to improve local educational outcomes and the local economy. As Steward Sandstrom said “We’re about helping our members grow and prosper, and a lot of that happens through education”.  (I rely here on the quotes from Julie Mack’s article.) He made it clear that the local chamber is “very supportive and appreciate” of local efforts to expand and improve preschool.

Kathy Jones highlighted the commitment of PNC Bank both locally and nationally to early childhood education. This commitment is exemplified by the Grow Up Great program of PNC.  In addition to providing philanthropic funds for early childhood education, PNC will also pay for its employees to do volunteer efforts in the area of early childhood programs.

As Kathy Jones said, preschool education can benefit the bank long-term because those children will “grow up and need banking services” (quoted from Julie Mack’s article). So the commitment is more than just philanthropy.

Is Kalamazoo unique in having a potential for business support for early childhood programs? I don’t think so. I think that in most local communities, many local business leaders can be convinced to support high-quality early childhood programs. To convince local business leaders requires marshaling high-quality research information on the benefits of early childhood programs for local economies.  In addition, this research information and advocacy must be communicated on a consistent basis through both one-on-one meetings and small group meetings.  Press releases and large events are helpful but not enough. More personal or  smaller group sessions are  more effective ways of engaging in a constructive dialogue with the business community about early childhood programs, and what role early childhood programs might play in an overall local economic development strategy.

Posted in Early childhood programs | Comments Off on Kalamazoo event highlights the potential of business support for investing in kids

Responding to state budget concerns

Posted on February 24, 2011 by timbartik

As outlined in a previous post, many states are facing budget shortfalls for fiscal year 2012 (the fiscal year which starts July 1, 2011 in most states, and runs until June 30, 2012). In another post, I pointed out that even facing budget crises, many governors and legislators are able to find room for sizable new initiatives. In many cases, such new initiatives are much larger than some of the wildest dreams of early childhood advocates. We can afford to invest in early childhood programs. Whether we do so is a question of priorities.

However, in some states the political reality may be that early childhood programs will be called on to show budget efficiencies.   What might be the best response if that is the political reality?

Quality of early childhood programs should never be negotiated away. It is a poor compromise to agree to budget cuts that result in program quality that is inadequate. Maintaining program enrollment with inadequate program quality does not promote state economic success. In the long-run, it probably is a recipe for the program’s political death.

After quality is assured, early childhood advocates should strive to keep coverage as broad as possible among the children and families who are most likely to show strong benefits from the program.  For programs such as the Nurse Family Partnership, that is all disadvantaged first-time mothers. For preschool, as I have outlined in previous posts, the evidence is that there are strong benefits both for children from low-income families, and for children from middle-income families.

Keeping benefits broad obviously has political advantages. Narrowing participation to only some beneficiaries, when others may benefit almost as much, also raises questions of equity. In addition, such narrowing makes it harder for the program to have large impacts.  Too narrow a program cannot have sizable impacts on state economic development.

Cost-sharing can be negotiated. This cost-sharing should be focused on some of the beneficiaries from early childhood programs, as long as such cost-sharing does not significantly reduce access to the program or program impact.

For example, as outlined in a previous post, high-quality preschool programs will lead to lower special education costs for local school districts. Therefore, a larger school district share of costs might be negotiated.

High-quality preschool programs may also lead to higher property values. As outlined in several previous posts, these higher property values may occur because parents may be attracted by higher school test scores and other effects of better preschool access. Therefore, local communities may legitimately be asked to devote some property tax revenues to support such programs.

One can imagine some creative financing approaches. For example, states could consider establishing tax increment financing districts for areas that fund early childhood programs. Some portion of the property tax revenue from property value increases in such districts could be devoted to early childhood programs. This may reduce the long-run need for state budgetary support for these programs.

How about fees for families participating in early childhood programs? As always, the devil is in the details. If the fees are imposed on upper class families that can afford to pay the fees, and who in any event probably have somewhat lower benefits from the programs, then the fees might help reduce state budgetary costs without impairing much the overall effects of the program. On the other hand, large fees on middle class families might sizably reduce participation of many children who would have benefited considerably from the program. Such fees, by narrowing program access, may significantly reduce the state economic development benefits of early childhood programs.

Accountability is a legitimate demand of state budget reformers. Early childhood programs should welcome well-designed accountability requirements. The effects of many early childhood programs can be rigorously evaluated. For example, for preschool programs, it is possible to do a rigorous evaluation with well-designed tests administered at preschool entrance and kindergarten entrance. These tests should look at both “hard skills” (e.g., literacy skills, math skills) and “soft skills” (socio-emotional skills).

Well-done accountability provisions for state-funded early childhood programs are likely to demonstrate that many such programs are efficient ways to achieve public goals, such as increased test scores of 3rd graders. On the other hand, such accountability provisions may lead to some weaker providers of early childhood programs being identified, and forced to improve or be defunded.

None of this is meant to alter my conclusion that on the whole, states should be considering ways to increase the overall investment in high-quality early childhood programs. This is much more easily accomplished with state budget expansions than with state budget cuts. However, if the political reality is that there will be state budget cuts, it is best to maintain program quality and equitable program coverage with some cost-sharing from other units of government, or some use of creative financing approaches.

Posted in Early childhood program design issues, Early childhood programs | Comments Off on Responding to state budget concerns