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Preschool Matters Today

Why the Source of Preschool Funding Matters


September 2, 2016
Economics and FinanceGovernance and Accountability
by Richard Kasmin

While research demonstrates the educational, economic, and social benefits of quality preschool, a portion of the public continues to see early learning as a social welfare program — babysitting for the poor — rather than education. From that perspective it makes little sense to provide the same universal access to preschool programs as to K-12 education.

The view of preschool as welfare influences the way preschool education is financed and helps explain why the US doesn’t offer every child a quality preschool education. Preschool funding is much more heavily dependent on a patchwork of federal programs — a tradition more reflective of social insurance programs than public education, which is primarily a state and local responsibility. As a result in most states preschool programs including Head Start and subsidized child care target only the most vulnerable young children — a noble goal for sure, but even these programs fail to reach most of the intended beneficiaries and funding levels are far from adequate for a quality early education.

If the US public was more convinced of the educational value of pre-K, would we see more state and local financial resources being invested? It seems likely. Most states do provide some funding for preschool and child care, but local funding is much less common. By contrast, 45% of public K-12 education comes from local taxes, the large majority from property tax receipts. State resources account for another 47% of spending. The rest — just 8% — is filled by federal funds. If the local share for early childhood programs were equal to that for K-12, funding for state pre-K programs would just about double.

Taking a broader view including Head Start and state funded pre-K, just over half of the dollars come from federal government financing (51%), with states providing 39% and just 9% deriving from local sources. With a few notable exceptions, such as Maine, Oklahoma, and West Virgina, most states have virtually no local tax support for public early education programs. See chart

Another noteworthy feature that relates to the welfare perspective on preschool is the lack of any entitlement. Rather than viewed as a necessary expenditure, charity is viewed as depending on the fiscal climate. Most state and local support for pre-K is generated from annual/biennial general budgetary appropriations (81.5%). The rest of state-generated funds come from dedicated sources — money tied specifically for use in pre-K such as state lotteries and so-called sin taxes (e.g.: beer tax) that vary with economic circumstances. In the few states that do tap significant local funding for pre-K, most of that is done via property taxes. The table in the presentation titled “Sources of State Pre-K Funding” shows these nationwide averages and examples of funding breakdowns for a handful of states that illustrate some of the state-to-state variability in funding (AZ, CO, NJ, OK, and TN).

The other aspect of state and local preschool finance that relates to public perception is distribution of funds. Approximately 64% of preschool funding is allocated via capped grants, which are, in essence, products not of what funding is needed but rather of what is available. Grants have no underlying system of growth in terms of inflation or links to adequacy of services and the numbers of children needing preschool. Rather, grants are based on what is available in government coffers and what lawmakers decide they are willing to allocate in the current year. Grant systems are no way to run a stable, effective education system. In contrast, school funding formulas used for K-12 education may be far from perfect, but they assume a base level of financing and reflect district and pupil needs based on changing populations.

However, use of school funding formulas for pre-K does not guarantee such programs will be adequately funding. Some states limit formula funding to a targeted portion of their population. Some cap the amounts provided. Others use the formula to make pre-K universally available but offer few hours of preschool per week. Issues that arise when using a funding formula for preschool will be more fully discussed in a future blog.

At a time when families across the US are struggling to pay for quality preschool, it’s time we focused on developing a sustainable and equitable funding structure for early care and education. We long ago decided an educated public was an outcome worth the shared expense of providing public schools. Today, research points to preschool as a key public investment for the future. We should embrace early education as an integral entry point for a lifetime of learning and make sure that we put in place all of the elements required to get the best return on our investment — including a stable and effective financing system.

Richard Kasmin is a research project coordinator at the National Institute for Early Childhood Education (NIEER). His primary research responsibility is analysis of early childhood education finance.