Toolkit Offers Ideas for Generating Local ECE Revenue

Blog Post
June 23, 2016

When the National Institute for Early Education Research (NIEER) recently released its annual summary of state-funded pre-K programs, they found only modest gains in pre-K access, quality, and funding for three- and four-year-olds across the country. While average state spending per child enrolled in pre-K increased by $287 in 2015 to a national average of $4,489 per child, this funding level still represents a decrease from 2002-2004 levels.

This lack of state investment in pre-K is a major reason why so few three- and four-year-olds are able to access these programs. NIEER’s report found that only 29 percent of four-year-olds and five percent of three-year-olds are currently enrolled in state pre-K programs. Steve Barnett, NIEER’s Director, pointed out that if this slow rate of growth in pre-K access continues “it will be another 50 years before states can reach all low-income children at age four.”

Stagnant state funding of pre-K coupled with strong evidence of the benefits derived from pre-K programs has led an increasing number of cities across the country to generate local revenue to fund early education programs, including pre-K. A new financing toolkit created by the North Carolina Early Childhood Foundation and North Carolina Budget and Tax Center is making it easier for cities to do just that.

This toolkit details funding mechanisms that can be implemented at the local level as a means to expand investment in early education programs. Cities around the country are using a variety of mechanisms to generate revenue including: property taxes, sales taxes, social impact bonds, tax credits, municipal or county bonds, and others.

The toolkit also highlights current federal and state funding streams used to pay for early education programs and provides a helpful primer for citizens and advocacy groups on how local governments make budget decisions. While these tools are focused primarily on North Carolina, the ten case studies highlighted in the toolkit offer concrete examples from local communities around the nation that are finding creative ways to fund early education programs.

For example, in 2012 San Antonio voters approved a referendum to increase local sales taxes by 1/8th of a cent. While the sales tax increase only cost each household about eight additional dollars per year, it’s estimated to generate total revenue of about $268 million over eight years. This money is being used to fund Pre-K 4 SA, a full-day pre-K program for four-year-olds from low-income families. The program began operating in 2013 and now serves approximately 1,700 children and has plans to serve 2,000 children next school year according to a program official. Early results suggest that four-year-olds who attend Pre-K 4 SA are making significant gains in both cognitive and social-emotional skills.

Seattle took a different approach to generating local revenue for pre-K. After an analysis found that between 3,300 and 4,500 children in the city were not enrolled in any sort of pre-K program, Seattle voters approved a referendum in 2014 to increase property taxes to fund the Seattle Preschool Program. A homeowner with a home worth $400,000 can expect to see a tax increase of about $43 per year. The property tax increase is expected to generate a total of $58.2 million over four years to fund a full-day pre-K program for both three- and four-year-olds that will serve 2,000 children in 100 classrooms by 2018.

Many cities across the country are continuing to search for local revenue sources to fund early education programs. In November, for example, Cincinnati voters will decide whether to increase the local property tax rate in order to provide two years of high-quality pre-K for the approximately 9,000 three- and four-year-olds in the city through the Cincinnati Preschool Promise. If passed, the tax levy will generate $48 million per year, $15 million of which will go to establish pre-K starting at the beginning of the 2017 school year (the remaining $33 million would be allocated to Cincinnati Public Schools). Currently, only about half of children in the city are academically prepared for kindergarten when they begin the school year.  

As long as state spending on early education programs continues to lag and limit young children’s access to programs, we can expect to see more cities taking the initiative and seeking out how they can make the needed investment on their own.