Rx for President Obama’s Early Learning Budget: Tie it Firmly to Education Reform

February 5, 2010

Although I have long championed a big boost in the federal commitment for early care and education, I have a major concern with the FY 2011 early care and education budget increases President Obama proposed this week. The funding increases the president proposes for FY2011 are, if nothing else, big. They include:

• A $1.6 billion increase in the Child Care and Development Block Grant for a new total of $6.65 billion. That’s the biggest increase that program has seen in decades. Some $800 million of that would not require a state match.
• A $989 million increase for Head Start and Early Head Start, for a new total of $8.2 billion.
• Somewhere in the neighborhood of $9 billion over 10 years for a new Early Learning Challenge Fund (ELCF) that would make competitive grants to states to improve the quality of early learning programs to help children enter kindergarten ready to succeed. (This has not yet passed in the Senate, perhaps because it depends on savings in student loan costs that are being fought by business interests.)
• $450 million for a restructured literacy program the details of which are not yet available.

The President’s commitment to early care and education in tough budget year is admirable. Assuming the Early Learning Challenge Fund passes, we could be looking at a $4 billion expansion of resources in the coming year — and that’s before we take into account the President’s doubling of the child care tax credit! So why am I concerned?

I worry that the new spending will be effective only if it is accompanied by serious reforms. Recent studies find that child care subsidies mostly move children from informal to formal care and have little or no effect on maternal employment. Yet, the quality of subsidized care in the United States is so low that child development may not be improved and might even be harmed. Early Head Start and Head Start produce positive results for children, but are nowhere near good enough. Of course, it doesn’t have to be that way; we can give children better programs.

If child care and Head Start are to receive more money, I would urge it be tied to higher standards, incentives for better performance, and accountability. This is the Obama Administration prescription for education reform (as I read it), and one the ELCF is designed to bring into the birth to five realm. If these new dollars are to be used effectively, the ELCF must be part of the package. And, I would encourage Congress to go even further. Tie new child care and Head Start funds to new requirements for competition, higher standards, accountability. That, combined with rigorous evaluation, can ensure our children truly benefit from these significant new investments.

Steve Barnett
Co-Director, NIEER

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For-Profit Pre-K Providers Faring Reasonably Well … So Far

January 8, 2010

One of many fascinating articles by Roger Neugebauer at ChildCare Exchange provides a snapshot of how the top 50 for-profit child care companies are faring and their major concerns.

Like most of the rest of us, CEOs of the top 50 are most concerned about the state of the economy and the rising cost of health insurance. Economists are already looking at shifts from private schools to public as parents find themselves less able to pay for education. Out of work parents don’t qualify for child care subsidies and state’s will have a very hard time maintaining child care subsidies once the stimulus funds run out. Look for more and more states to press for additional help from the federal government for FY 2011 and beyond. Concerns about health insurance may be influenced by the pending health care reform legislation and its implications for businesses that do not currently provide insurance to their employees. Concerns about the pending legislation also tie into worries over state budget shortfalls as states worry about their future obligations for health care costs.

Number three on their list of concerns is competition from public pre-K in the public schools. A growing population has allowed for some noncompeting growth in both public and private sectors. However, in the long-run private child care should view public pre-K as an opportunity rather than a threat. For-profit as well as not-for-profit providers can be integral components of mixed delivery systems for high-quality public pre-K. States like New Jersey have shown that with firm adherence to standards, adequate funding, and a continuous improvement process, private providers can improve service quality, provide a better living for their workforce, and grow. They can reap substantial benefits from the supportive infrastructure that public education provides while bringing more choice and competition than the public schools alone would offer.

Seventh on the list of concerns for CEOs is lack of subsidies for middle-income parents. We share that concern. With most states looking at dire economic circumstances for the foreseeable future and Obama administration initiatives taking an approach primarily targeted to the poor, a broad swath of working families stand to lose access or face declines in the quality of early education.

Neugebauer points out another fact. The two largest providers, Knowledge Universe (founded by Michael Milken) and Learning Care Group, decreased their capacity somewhat in 2009. Far and away the largest for-profit providers, they account for a combined total of nearly 400,000 children served. No doubt this reflects the effects of the economic downturn on effective demand. However, we as a field need to think carefully about the advantages and disadvantages of such concentrations of market share. The quest for bigness that led these and other companies to embark on aggressive acquisition campaigns earlier in the decade can lead to big problems, and we don’t need to look to the financial sector to see them. In Australia, where the mega-chain ABC Learning Centres went into receivership, parents and communities across the country were left scrambling to keep local centers open. As of last month it looked as if the ABC story will have a happy ending, however. A new kind of non-profit social investment syndicate called GoodStart bought 678 ABC Learning Centres for a small fraction of the $3 billion market capitalization the company once had and promised to plow the profits back into services for children.

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Clearing the Way for Better Benefit-Cost Analyses

December 23, 2009

Benefit-cost analyses (BCA) — quantifying benefits of interventions, often expressing them in dollars returned per dollar invested — are key drivers of early education policy. They’re widely consulted when early education decisions are debated, but few who use them have much in the way of an understanding of how they come about. A booklet just off the press from the National Research Council goes a long way toward explaining the issues.

Strengthening Benefit-Cost Analysis for Early Childhood Interventions is a summary of a March 2009 workshop where leading practitioners of the discipline, including NIEER Co-Director Steve Barnett, talked about the challenges of generating dependable BCAs and ways to strengthen them. Their discussions provide a window on the science — and art — of conducting BCAs. Here are some key issues:

• BCAs depend on rigorous program evaluations. Of course, the gold standard in rigor is the randomized controlled trial — a method that is not always available. Complicating matters is the fact that the control condition against which interventions are evaluated are seldom composed of kids who had no exposure to early childhood programs. These days, most kids in the general population attend a program of some type. These issues weren’t much of a factor in the era of the Perry Preschool Program — something that makes data from that era all the more valuable.

• Arriving at true program costs is a challenge. Budget figures gathered in advance of program implementation often don’t portray true costs and total costs may not be completely accounted for, particularly when programs involve matching or braided funding. Analysts often end up estimating cost using comparable market costs or deriving other measures such as “shadow prices.” For example, in many developing economies observed wage rates overstate the true marginal cost of labor while observed interest rates understate the true cost of capital. Accurate estimation of cost is one of the most neglected aspects of this work. All too often, cost receives little attention and the cost estimate used has no scientific basis at all. Yet, cost is just as important for arriving at a good decision as benefit.

• Assessing program value is arguably the area where researchers have the most work cut out for them. Some benefits of programs like greater socio-emotional development or better health behaviors are inherently more difficult to put a value on and have probably been under-estimated in the past. Manifestations of their value often don’t occur for years, even decades, in the future. In lieu of very long-term studies we must build on other research, linking pre-K to outcomes—grade retention, behavior problems, achievement, dropout—that other studies in turn link with later education, earnings and employment, mental and physical health, crime, and civic participation.

• Maintaining the integrity of study samples and having robust data available for long-term studies is a growing concern due to degradation of contact information and the growth of privacy concerns.

The presenters pointed to work done in other fields that has the potential to inform BCAs in early childhood education. In health economics, for instance, analysts are measuring the quality and length of lives saved by a health intervention in terms of a Quality Adjusted Life Year (QALY). Researchers now estimate the value of detecting and medically treating lead poisoning at $1,300 per QALY gained. When they factored in the additional cost savings from remedial education not needed when lead poisoning is prevented, they found the intervention was a sound investment.

Other recommendations the group discussed include more standardization of economic measures such as discount rates that analysts apply over time and developing more standardized practices for research procedures in the field.

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