Published Online: February 21, 2008
Published in Print: February 27, 2008, as States Struggle to Find Secure Pre-K Funding
Updated: April 7, 2012

States Struggle to Find Secure Pre-K Funding

Programs are vulnerable amid budgetary worries, despite their popularity.

Even though state spending on prekindergarten has grown $1 billion nationwide over the past two years, a report says, state policymakers looking to sustain and expand their programs—especially in tough budget times—are still scrounging for more money.

The reportRequires Adobe Acrobat Reader from the Washington-based advocacy group Pre-K Now, released this month and presented at a conference here, shows that states are increasingly seeking to support their pre-K programs through school funding formulas embedded in state law, which provide the most stable source of revenue and the greatest potential for growth.

Of the 40 states with publicly funded prekindergarten programs, 11 now pay for them through their school formulas and not through individual line items in their budgets—a trend that’s emerged within the past two years.

And states that don’t pay for preschool that way are getting financially creative, often turning to revenue from gambling and cigarettes to pick up the tab. Three states use cigarette-tax revenue or proceeds from their share of a national tobacco settlement to pay for pre-K, while four states use lottery or riverboat-gambling money.

The complex issue of financing the booming prekindergarten movement was showcased here Feb. 15-17 at the education finance summit of the Denver-based National Conference of State Legislatures.

“The bottom line always is: How do you get the money?” said Diana Stone, a senior fellow at the Seattle-based Washington Appleseed Center for Law in the Public Interest, who conducted the finance research for Pre-K Now.

Her report found that lotteries and private donations can supplement pre-K funding, but that paying for prekindergarten through general tax revenues—and preferably through funding formulas—provides the most secure way to sustain and expand the programs.

Funding prekindergarten is becoming more important as such initiatives continue to be politically popular. The two remaining Democratic presidential contenders, U.S. Sens. Hillary Rodham Clinton of New York and Barack Obama of Illinois, have both emphasized preschool in their education proposals. ("Democrats’ K-12 Views Differ, Subtly," Feb. 27, 2008.)

State policymakers, particularly governors and legislators, are swayed by the evidence that children who get an early start, particularly students deemed at risk of academic failure, perform better than those who don’t attend preschool.

“We know that’s where the action is,” said North Carolina state Sen. Vernon Malone, a Democrat, whose state uses lottery and general tax revenues to pay for pre-K. In addition, North Carolina is considered a model for using public-private partnerships to help supplement its programs.

“We’re putting a great deal of money there,” Mr. Malone said at the NCSL conference.

Oklahoma Model

States’ school funding formulas are complicated equations that usually give districts aid based on enrollment. Prekindergarten programs that are specifically included in states’ school funding formulas can be better assured that their revenue will grow with enrollment. And they are tied to K-12 education programs, which usually are a place of last resort for cuts in tough budget times.

Oklahoma seems to make the most convincing case for that method of funding.

The state started supporting its preschool program through its school funding formula in 1990; by the 2007-08 school year, 70 percent of the state’s 4-year-olds were in pre-K, the highest rate in the nation. That’s due, in part, to the power of financial incentives. On a per-pupil-funding basis, the state provides school districts 30 percent more for each prekindergartner than it does for each older elementary school student.

Last year, according to the Pre-K Now report, Iowa became the 12th state to finance its prekindergarten programs through the overall school funding formula, effective in fiscal 2009. In addition, West Virginia plans to fully finance preschool for all 4-year-olds through its funding formula by the 2012 fiscal year, according to the report.

“Once you get it into the school funding formula, it is much easier to expand,” said Michael Griffith, the school finance analyst for the Denver-based Education Commission of the States.

Wisconsin, however, illustrates how disincentives can be built into state formulas.

Though the state in 1873 passed a constitutional mandate requiring education for 4- to 20-year-olds, Wisconsin districts must raise one-third of preschool funding through local property taxes. The rest comes from the school funding formula. One-third of the state’s districts don’t offer prekindergarten.

Elusive Cash

States that fund prekindergarten programs rely on a variety of revenue sources—some more stable than others. A state's school funding formula is seen as the most secure method of financing pre-K.

When a program is paid for entirely outside the school funding formula, it is much easier to cut. Such cuts could be especially tempting this year, when at least 15 states are experiencing budget deficits, according to a recent report by the National Governors Association and the National Association of State Budget Officers.

A case in point: Alaska Gov. Sarah Palin, a Republican, proposed to put an additional $1 million into early education programs for the 2009 fiscal year, but so far, the legislature isn’t cooperating. This week, the state House of Representatives cut that increase from the budget.

Other times, as Tennessee shows, lawmakers find the money where they can.

The state began a pilot pre-K program in 1998 with 30 classrooms, which grew to 150 classes by 2004, paid for through federal grants and a line item in the state budget of $10 million that wasn’t going to grow.

“We needed to find the funds to broaden the program,” said Bobbi Lussier, the executive director of the state’s office of early learning.

So the state turned to its lottery, one of three states to do so. In the 2007-08 school year, the Tennessee lottery will funnel $25 million into pre-K; the state will add another $25 million to the program through other sources. The money pays for 257 classes this year.

Ms. Lussier noted that the money is paying for fewer and fewer classrooms each year, however, because expenses are growing faster than funding. She said that Gov. Phil Bredesen, a Democrat, proposed an additional $25 million in his budget for next fiscal year, but “that’s meeting some resistance because it’s a tough budget year.”

New Wrinkles

Prekindergarten financing is complex because taxpayer money isn’t just going to public schools that provide the programs, but also to nonprofit and for-profit centers. In addition, many states don’t provide additional money for transportation or capital costs.

Such shortcomings have sparked another emerging creative-finance trend that wasn’t even recognized by the first finance report done for Pre-K Now in 2006: public-private partnerships.

One of the oldest, largest, most successful examples is North Carolina’s statewide Smart Start program, which has raised about $257 million from the private sector since 1993. That money supplements the state’s $200 million annual contribution.

Partnerships are becoming especially useful for small-scale programs in states that are trying to jump-start their pre-K movements by using funds from business or nonprofit communities to match state money. In South Dakota, for example, Gov. Michael Rounds, a Republican, last year committed $700,000 in economic-development funds for a three-year pre-K pilot program in Sioux Falls, to be matched with nearly $1 million from the United Way and the business community, according to the Pre-K Now report.

States seeking political momentum for their prekindergarten programs can look to Texas, which has one of the longest-standing commitments—dating back to the mid-1980s—to supporting prekindergarten through its school funding formula.

“The impetus was the high-risk population,” said Lilie Elizondo-Limas, the director of early-childhood initiatives for the Texas Education Agency, who said the state was forced to deal with its growing immigrant population.

“With our state accountability system,” she said during the conference, “it was going to be necessary to begin addressing these at-risk students.”

Sometimes the stumbling block appears to have little to do with money.

“We’re really nowhere when it comes to pre-K,” said Idaho state Rep. Shirley G. Ringo, a Democrat, who came to the recent finance summit in search of ways to spur a movement in her state. Last year, her chamber, controlled by Republicans, passed a nonbinding resolution declaring opposition to state-funded prekindergarten.

“There are those who think preschool should happen at home,” Ms. Ringo said.

Vol. 27, Issue 25, Pages 15,18

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