Section 3: Finance

Cost and Funding of Prekindergarten Programs

Dramatic increases in state funding demonstrate the growth of public prekindergarten programs. Between 1988 and 2000, combined state spending grew from $190 million to nearly $2 billion.¹ These figures include expenditures from fourteen states² that began new prekindergarten programs, as well as substantial increases in existing state programs. State spending varies widely based on the design of the program and whether or not the state leverages additional funds from federal or local sources. This section describes the variation in state spending, potential funding streams, and funding distribution mechanisms.

It is important to acknowledge that private funding, primarily from parents, is a source of revenue for many prekindergarten programs. However, private funding for prekindergarten programs is difficult to quantify, and currently there are no reliable estimates of its magnitude. Therefore, it is not included in this analysis.

This section only examines the public financing of public prekindergarten programs as defined by this framework. The definition includes the set of educational programs serving three- and four-year-olds that are part of a formal, state-funded initiative. The programs may be administered by a variety of government agencies, and may be housed in various locations, including public schools, Head Start centers, and community-based child care centers.

Cost Estimates

Cost estimates for prekindergarten programs vary widely depending on program design. Key components³ that drive costs include the following.

• Size of target audience – Will the program be available to all children or a sub-group?
  
  
• Rate of take-up – How many eligible children will access services?
  
  
• Duration of program - Will the program run half-day or full-day? For how many days each week, and how many months each year?
  
  
• Competitiveness of staff salaries - Will the program offer salaries that are competitive with the public school system or the private child care system?
  
  
• Type of facilities - Will the program run in existing space, rented space, donated space, or a public building? Will a new facility have to be built?
  
  
• Number and quality of offered services - How comprehensive is the program? Will it offer social services, health/dental/vision screenings, nutrition, or parent education?
  
  
• Costs of infrastructure– Will the budget include expenditures for items like professional development, monitoring, technical assistance, program evaluation, or databases?

A comparison of costs across states is difficult, if not meaningless, because of this wide variation in program components. Small programs in small states spend hundreds of thousands of dollars, while large programs in large states spend hundreds of millions. Per-child spending may be a more meaningful number, but still offers a poor comparison as it does not account for variation in program duration, quality standards, and scope of services. For instance, some part-day programs cost less than $2,000 per child, while some high-quality, ten-hour-day, full year programs can cost as much as $7,000 per child in Connecticut and more than $10,000 per child in the thirty New Jersey Abbott districts.⁴ The average cost per child in the federal Head Start program is another benchmark for costs. Head Start spent an average of $6,934⁵ per child in fiscal 2002 for a part-day program during the school year, offering extensive support services for very low-income families.

There is disagreement about the minimum per-child expenditure necessary to fund a high-quality prekindergarten program. The estimated range of costs for an average to high-quality prekindergarten program with a six-hour school day that runs through the entire school year is $6,000 to $8,000 per child.⁶

Funding Streams

State spending does not necessarily reflect the total public cost of prekindergarten, as many states combine federal, state, and local funds.

Federal funding streams. Every state receives federal Individuals with Disabilities Education Act (IDEA) funds to offset the cost of providing free and appropriate education to preschool children with special needs. Most states use federal child nutrition program funding from the U.S. Department of Agriculture for lunches and snacks. Some school districts use Title I funds from the U.S. Department of Education to provide prekindergarten to educationally disadvantaged children. Federal Child Care and Development Block Grant or Temporary Assistance for Needy Families (TANF) funds can be leveraged if the families of the enrolled children meet federal income eligibility requirements. For example, Georgia matches federal TANF funds with prekindergarten funds to extend the day from six to ten hours for TANF-eligible families.

Local organizations in every state receive federal Head Start funding, but the Head Start program is a separate program in which the state has no formal role. Some states supplement Head Start funds with state revenues to serve higher numbers of eligible children. These programs follow Head Start performance standards, but states do play a role in their oversight.

State funding streams. With few exceptions, the majority of state funding for public prekindergarten comes from general revenues. General revenues can be generated through taxes or fees, as well as through lotteries and gaming. States have the discretion to reallocate existing revenues and/or generate new revenues to fund prekindergarten programs.

Local funding streams. In some states, prekindergarten programs receive local funding. This may be because of a state requirement that localities provide funds, state efforts to encourage local funding, or recognition among localities that they cannot fulfill program expectations without contributing additional funds.⁷

States fund their prekindergarten programs in a variety of ways.

• Education lottery: Sales of lottery tickets in Georgia generate more than $240 million annually for voluntary, universal access to four-year-old prekindergarten.
  
  
• Cigarette tax: California’s Proposition 10 put a fifty-cent tax on cigarettes, generating more than $700 million annually. Local boards have discretion over how to spend the funds for children ages zero to five, but several counties are using the funds for universal access to prekindergarten. For example, Los Angeles County committed $100 million a year for ten years to jump-start the move to universal prekindergarten.
  
  
• Sales tax: Since 1984, a one-cent increase in the sales tax has funded South Carolina’s prekindergarten program.
  
  
• Title I: An estimated 8 percent⁸ of federal Title I funds support prekindergarten programs. School districts in Charlotte, North Carolina, and Chicago, Illinois, run two of the largest Title I-funded prekindergarten programs.
  
  
• Sliding fee scales: Some states, such as Massachusetts and Minnesota, supplement public funding by charging higher-income parents using a sliding fee scale.

Distribution of Funds

States distribute prekindergarten funds in one or more of the following ways. ⁹

• School aid formula: States reimburse schools for prekindergarten students through the state education aid formula. This distribution method puts prekindergarten on an administrative and financial parallel with the K-12 education system, although some states limit reimbursement (and thus, eligibility) to students at risk of educational failure. Per-pupil reimbursements may be weighted to accommodate the higher costs of serving children who are disabled, learning English, or poor. Some states also provide a higher per pupil reimbursement rate to accommodate the smaller class sizes for prekindergarten.
  
  Examples: Maine, Oklahoma, Texas, Wisconsin.
  
  
• Allocation or noncompetitive grants: School districts or local units of government receive a set allocation based on criteria determined by the state. (For example, districts with high rates of poverty, districts with high dropout rates, etc.) The state determines who can deliver the services or provides guidance to the local jurisdiction to make that decision. Local districts do not compete for funding, and funds are capped at the allocated amount.
  
  Examples: Kentucky, Maryland, New York, North Carolina.
  
  
• Competitive grants: Local programs or communities submit applications for funding. States can design the application to target communities with the greatest need, to encourage a broader range of services, or to ensure diversity in prekindergarten providers. Funds are capped at the allocated amount.
  
  Examples: Colorado, Illinois.
  
  
• Head Start supplement: State revenues expand the federal Head Start program in order to serve more eligible children. State-funded programs follow the Head Start standards.
  
  Examples: Delaware, Oregon.

For More Information

Barnett, W. S., and L.N. Masse. “Funding Issues for Early Childhood Education and Care Programs.” In Early Childhood Education and Care in the USA, Eds. Cryer and Clifford. Baltimore, Md.: Paul H. Brookes, 2003: 137-65.

Golin, S., A. Mitchell, and M. Wallen. The Cost of Universal Access to Quality Preschool in Illinois. Washington, D.C.: Institute for Women’s Policy Research, 2003. Available at:
http://www.iwpr.org/pdf/preschoolIL.pdf

Helburn, S. W., and B.R. Bergmann. America’s Child Care Problem: The Way Out. New York: Palgrave, 2002.

Mitchell, A. Implementing Universal Prekindergarten in New York: Blended Funding and other Financial Considerations. New York: Families and Work Institute, 1998.

Mitchell, A., C. Ripple, and N. Chanana. Prekindergarten Programs Funded by the States: Essential Elements for Policy Makers. New York: Families and Work Institute, 1998. Available at:
http://www.nccic.org/pubs/prekinderprog.pdf

Stoney, L., and K. Edwards. Child Care Financing Matrix. Available at: http://www.nccic.org/pubs/ccfinancingmatrix.html. Viewed November 2003.
http://www.nccic.org/pubs/ccfinancingmatrix.html

Web Resources

Financing strategies in early childhood education

Alliance on Early Childhood Finance
http://www.earlychildhoodfinance.org

National Institute for Early Education Research
http://nieer.org

The Finance Project
http://www.financeproject.org

¹ A. Mitchell, Prekindergarten Programs in the States: Trends and Issues (Climax, N.Y.: Early Childhood Policy Research, 2001). Available at:
http://www.nccic.org/pubs/prekinderprogtrends.pdf

² Ibid.

³ J. Kaplan, “State-Funded Prekindergarten Programs,” Economic Success Clearinghouse (formerly Welfare Information Network), Issue Notes 2, no. 9 (1998).

⁴ Information collected from the National Center for Early Development & Learning’s 2002 state prekindergarten survey. Available at:
http://www.fpg.unc.edu/~ncedl/pre-kprograms/

⁵ This is the federal contribution, and does not include the mandated 20 percent local match.

⁶ R.M. Clifford and J.J. Gallagher, Designing a High-Quality Pre-Kindergarten Program (Chapel Hill, N.C.: North Carolina Education Research Council, 2001). Available at: http://erc.northcarolina.edu/docs/publications/prekprogram.pdf.
Also, W.S. Barnett and L.N. Masse, “Funding Issues for Early Childhood Education and Care Programs” in Early Childhood Education and Care in the USA, Eds. Cryer and Clifford (Baltimore, MD: Paul H. Brookes, 2003): 137-65.

⁷ K. Schulman, H. Blank, and D. Ewen, Seeds of Success: State Prekindergarten Initiatives 1998-99 (Washington, D.C.: Children’s Defense Fund, 1999).

⁸ Barnett, “Funding.”

⁹ Schulman, Seeds.

¹⁰ Ibid.

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NPC Prekindergarten Framework
©2004 The University of North Carolina at Chapel Hill
National Prekindergarten Center, FPG Child Development Institute, UNC-CH
[Section 3 revised 1/31/2004]