Special Report

Adequate Financing

By Jessica L. Sandham — January 10, 2002 12 min read
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Call it the crazy-quilt approach. When it comes to paying for early-childhood education, states are increasingly working to patch together aid from a variety of state and federal sources to better meet the needs of young children and families.

Driven by such considerations as the need for more child care following the 1996 welfare overhaul, new research linking early learning to later school success, and the reach of the education standards movement to younger children, states are putting more money into children’s preschool years than ever before.

Unable to piece together enough funding to offer early-childhood programs to all children, though, states are primarily tailoring their patchwork style to serve youngsters faced with a variety of risk factors, including children from single-parent or low-income families and those with special needs.

Still, a growing number of states are seeking ways to give more families access to high-quality early-education programs, even if current state budget realities mean that universal access remains a faraway goal for most.

“There’s no question that there’s a significant trend toward more investment in prekindergarten programs,” says Louise Stoney, the founder of Stoney Associates, a research and consulting firm in Averill Park, N.Y., that specializes in early-childhood policy. “This isn’t a poor person’s issue, or something to be ashamed of,” she says. “This is something that all people need.”

Currently, 39 states and the District of Columbia underwrite prekindergarten programs for at least some of their 3- to 5-year-olds. In addition, 21 states plus the District of Columbia supplement federal Head Start dollars to serve additional poor children.

State spending for prekindergarten programs now exceeds $1.9 billion annually, according to a 50-state survey conducted by Education Week for Quality Counts. That’s a significant commitment compared with the estimated $190 million states spent in 1988.

“If we were going to invent the public school system today, knowing what we know, it would look different,” says Anne Mitchell, the president of the Climax, N.Y.-based consulting firm Early Childhood Policy Research and the author of a 2000 report on prekindergarten finance. “Anyone with any sense realizes that preschool is beneficial.”

Even though state spending on prekindergarten programs is greater than ever before, Mitchell notes, it is still dwarfed by that of the federal government, which pumped $6.2 billion into Head Start in fiscal 2001 alone. “States are making a large commitment,” Mitchell says. “But it’s not just states that are needed to close the gaps.”

Prekindergarten spending represents only one piece of the funding puzzle for early-childhood care and education.

Federal and state subsidies for child care and money available under the federal welfare block grant, along with a hodgepodge of funds for other programs for young children, often flow through state human services and other agencies separate from education departments.

As a result, it is hard to gauge the full scope of states’ commitment to early-childhood programs, especially without a central authority at the federal level empowered to gather data on such spending.

“Administratively, we just don’t have our act together,” says Stoney. “We need one early-care and -education data set. And unless Washington does it, there’s no way to get accurate data from all 50 states.”

Nevertheless, Stoney and other advocates maintain that ample evidence is available showing that the states’ increased commitment to young children also extends to expanding access to child care and improving the types of services children receive in such settings.

Building on the child-care subsidies provided through the Child Care and Development Fund, a federal program established as part of the broader welfare-reform legislation, many states significantly boosted their own spending on such subsidies.

In a November 2000 report commissioned by the U.S. Department of Health and Human Services, researchers reported that states had dramatically increased their spending on child care for low-income families between 1997 and 1999.

“The National Study of Child Care for Low-Income Families” pointed out that in the 17 states that served as the report’s sample group, the median spending increase on child care in that three-year period alone was 78 percent. States also worked to improve the quality of such programs, supporting more education and training for child-care providers in addition to providing salary enhancements, the study found.

Spending on child care has also grown as states have devoted a greater portion of their federal Temporary Assistance for Needy Families, or TANF, dollars to reducing the number of poor families on waiting lists for subsidized child care. Of the $24 billion states received through TANF block grants in 2000, almost 25 percent was directed to child care, according to a recent report by the Washington-based Center for Law and Social Policy.

“States have responded to the availability of funds in an incredible way,” says Ann M. Collins, the director of program and policy analysis for the National Center for Children in Poverty, an organization based at Columbia University that helped prepare the November 2000 study of child care for low-income families. “Between their own funds, the TANF funds, and the CCDF block grants, they’ve served a tremendous number of additional children with child-care subsidies,” she says.

Despite the growing government commitment, early-childhood experts note that parents still pay the lion’s share of the costs of child care. A 1997 report, “Financing Child Care in the United States,” found that family fees accounted for 60 percent of the total revenue sources supporting early care and education. Government sources paid 39 percent, and the private sector covered the remaining 1 percent.

For public higher education, in contrast, tuition and fees made up only 23 percent of total revenue, state appropriations covered 42 percent, and the remaining 35 percent was made up of federal, local, endowment, and grant money.

Mitchell, who wrote the report along with Stoney and Harriet Dichter, says the current funding breakdown likely remains more or less unchanged from that of 1997.

“I have no reason to believe it’s changed dramatically,” Mitchell says. “There have been increases in the federal share, but there are also increases in the number of parents getting child care and paying for it themselves.”

Children’s advocates also note that government subsidies for child care are based on the going market price of child care, rather than what it actually costs to provide high-quality care. As a result, even as states allocate more federal money for child care, the quality of the care often remains unchanged.

States base their child-care subsidies on market rates, and “the market doesn’t look at quality; the market looks at access,” says Adele Robinson, the director of public policy and communications for the Washington-based National Association for the Education of Young Children. “The market looks at what parents can afford to pay. That’s a very different question from what you need to do to provide quality care for children.”

Broader Access

But even as states try to increase child-care subsidies to needy families and shorten the waiting lists for them, some are also seeking to give working-poor and middle-income families greater access to higher-quality child-care and prekindergarten programs.

Early-childhood experts say the movement to provide broader access to such programs is necessary for reasons both practical and political.

By opening the doors of high-quality care and education programs to a greater number of families, states would likely increase the number of students who start kindergarten ready to learn-and secure greater support for sustained, long-term financing of such programs in the process.

“Public schools do well because middle-income kids go there,” says Robinson of the NAEYC. “To get the political will for early-childhood programs, you’re going to need some buy-in-and not just from families that are on the cusp of welfare.”

Georgia, which provides preschool to 4-year-olds throughout the state without regard to their families’ incomes, has been held up as a model of universal access since it first began the program using lottery revenues in 1995.

While no other state has matched the level of access the Peach State provides, Connecticut, New Jersey, New York, and Oklahoma are among those that have preschool programs designed to serve children from families across a range of income levels--if they live in the communities designated for aid.

New York lawmakers this year appropriated $225 million for the state’s universal pre-K program, which is slated to be phased in fully and subsidized at an annual level of $500 million. During the phase-in period, school districts are receiving aid for prekindergarten programs based on a formula that includes such factors as property wealth and the number of eligible children in a district. The program aims to ensure that all 4-year-olds in the state have the opportunity to attend preschool programs by the time the initiative is in full operation.

In New Jersey, prekindergarten programs are supposed to be available to all 3- and 4-year-olds who live in 30 high-poverty districts. The program was enacted in 1997 as part of the resolution of Abbott v. Burke, a long-running school-finance-equity lawsuit.

Connecticut also provides universal access to preschool programs to children in specific geographical areas, namely those in districts serving large numbers of poor youngsters.

In addition, districts in Oklahoma can opt to participate in a state program that provides preschool to 4-year-olds regardless of family income. Just over half the state’s 4-year-olds are now served by the program.

Many states, though, shy away from a universal approach to prekindergarten because they see it as too costly, especially now, with the slowdown in the economy.

Richard N. Brandon, the director of the Human Services Center at the University of Washington in Seattle, has been working to create various models for universal financing of preschool, along with Sharon Lynn Kagan, a professor of early-childhood and family policy at Teachers College, Columbia University, and a senior research scientist at Yale University’s Child Study Center.

Brandon says that many state policymakers dismiss universal access to early-childhood education as too expensive, based on what he calls “back of the envelope” calculations that fail to take into account the various approaches states might use to expand access to preschool.

Ultimately, Brandon says, four variables determine the cost of state-sponsored early-childhood programs: the maximum income level at which a family is eligible, the age at which a child is eligible, the relationship between the family’s income and the level of subsidy, and teachers’ salaries.

“We’re not expecting states to move to full coverage of universal care in one fell swoop,” Brandon says. “We’re saying if you do this kind of systems design, understand what quality will cost, and understand the design trade-offs, you’ll get the most coverage for the fewest bucks. Then you can implement the system incrementally as you’re moving toward an effective, universal system.”

Ohio education officials have been working with Kagan and Brandon to get a more accurate picture of the costs of expanded preschool access in the Buckeye State. Susan Tave Zelman, the state superintendent of public instruction, says she hopes to leverage various resources--including the state’s current spending on child care--and set up a more comprehensive system of early care and education statewide.

“It’s an issue of realignment and prioritization, and thinking about how we’re spending existing dollars as well as new dollars,” Zelman says. While state education officials would like to provide access to preschool programs to all children, she adds, they understand that it’s important to work incrementally first.

“We’re political realists, and we understand what the economic situation is,” the Ohio schools chief says. “But we need to do a better job of educating our policymakers. It’s a question of bringing all the players to the table.”

‘Sin Tax’ Financing

While most states provide money for early-childhood programs through general-revenue dollars, a growing number are tapping new sources to expand the services they offer young children. Two prominent examples include Georgia, which in 1995 established a state lottery to help pay for its universal preschool program, and California, where voters approved a cigarette tax in 1998 to shore up financing for improved child care and other programs designed to benefit young children.

Missouri also uses a “sin tax” to help pay for early-childhood programs, drawing on revenues from the state’s riverboat-gambling industry to provide competitive grants for preschool programs in public and private schools.

In Kentucky, meanwhile, the legislature opted to use 25 percent of the state’s tobacco-settlement money--$56 million every two years--to pay for a wide array of programs promoting the health and education of young children. The initiative includes everything from a public relations campaign encouraging women to avoid smoking and drinking during pregnancy to an incentive program for child-care centers that strive to lower their child-staff ratios and improve employee training.

“Now, we have a full circle of education reform,” says Kim F. Townley, the executive director of the Kentucky governor’s office of early-childhood development. “From the womb to the tomb, so to speak.”

Arkansas lawmakers last spring also set up a funding pool for early-childhood programs by authorizing a new 3 percent tax on beer. The beer tax is expected to raise some $9.7 million a year. Twenty percent of it will go to child-care subsidies; 80 percent will go toward improving the educational quality of home- and center-based care through the Arkansas Better Chance program.

Most of the beer tax will replace current spending, rather than provide supplemental dollars, however. The same year the tax was approved, the Arkansas legislature cut $6.6 million out of the existing $9.9 million budget for the ABC program, first begun in 1992. Revenues from the new tax will replenish that money and then some, but it won’t provide the kind of increases early-childhood educators had hoped for.

Regardless, Paul D. Kelly, the senior program coordinator for Arkansas Advocates for Children and Families, says he’s pleased to see early-childhood issues playing prominently in the legislature.

“The real victory for us was hearing an hour of floor debate on the absolute, essential need for early care and education to promote school readiness and take care of the needs of working families,” Kelly says. “What a wonderful thing to experience.”

In March 2024, Education Week announced the end of the Quality Counts report after 25 years of serving as a comprehensive K-12 education scorecard. In response to new challenges and a shifting landscape, we are refocusing our efforts on research and analysis to better serve the K-12 community. For more information, please go here for the full context or learn more about the EdWeek Research Center.

A version of this article appeared in the January 10, 2002 edition of Education Week


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