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Financial structure of early childhood education requires overhaul to make it accessible and affordable, report says


February 27, 2018
National Academies of Sciences, Engineering, and Medicine
Science Daily

High-quality early care and education (ECE) is critical to positive child development and has the potential to generate economic returns, but the current financing structure of ECE leaves many children without access to high-quality services and does little to strengthen the ECE workforce, says a new report from the National Academies of Sciences, Engineering, and Medicine. Transforming the accessibility, affordability, and quality of ECE provided outside the child’s home will require phased implementation, amounting to at least an estimated $140 billion annually from the public and private (philanthropy, employers, and families) sectors in the final phase of implementation. The report says an ideal financing structure should support high standards; a highly qualified workforce; and equitable access for families from all socio-economic, racial, ethnic, ability, and geographic backgrounds.

The committee that carried out the study and wrote the report estimated potential contributions from families and the public sector over phases, recognizing that increases in ECE funding will need to occur over time. By the final phase of implementation, the estimated total annual cost of providing high-quality early care and education for all children is at least $140 billion. If families contribute to the costs based on an affordable family payment schedule, the increase in public funding would grow from the current level of about $5 billion a year to $53 billion a year in the final phase. This would mean that public costs would increase to $82 billion and private costs would be $58 billion annually in the final phase.

“While high-quality early care and education for children from birth to kindergarten entry is critical to child development and has the potential to generate significant economic returns in the long run, it has been financed in such a way that makes early education available only to a fraction of the families needing and desiring care, and does little to further develop the early care and education workforce,” said LaRue Allen, Raymond and Rosalee Weiss Professor of Applied Psychology and chair of the committee.

The report focuses on early care and education that is paid, non-parental care provided outside the home for children before they enter kindergarten. Services may be offered on a full-day or part-day basis, and vary by type: some are publicly funded, some are private, market-based centers, and many other ECE settings rely on a mix of public and private funding.

Currently, funding for early care and education comes from a multitude of individual programs with different revenue streams, constituencies, eligibility requirements, and standards. Whereas public K-12 education is financed almost entirely by the public sector and available to all children, ECE typically involves substantial family payments. According to a recent estimate developed by the Build Initiative, families pay approximately 52 percent of the total cost of early care and education, with the public sector contributing 46 percent and non-parental private sector funding covering about 2 percent. Families with incomes below the federal poverty level spend about 20 percent of their income on early care and education, while those with income above five times the federal poverty level pay 6 percent of their income. The committee notes that families with higher incomes typically pay more for ECE, but they also have significantly more discretionary income available after paying ECE costs.