8. Secure Predictable, Sustainable, and Increased Funding for Children’s Earliest Years

The fragmented system of early education financing leaves far too many children and families without access to high-quality, affordable care, and many early educators with unlivable wages. Investments in children are inarguably important, yet consistently inadequate public funding has perpetuated cycles of inequity, devalued early educators, segregated children by family income, and left education leaders and providers maneuvering limited funds with equally limited success. Far greater, stabilized federal and state investments are essential to provide affordable care for families and high-quality education to all young children.

Increase public investments in early care and education. The National Academies Press consensus study, Transforming the Financing of Early Care and Education, lays forth several recommendations to reform our current system. First, federal and state governments should establish standards for quality and ensure that providers receive incentives and adequate funding to meet those high standards. Critically, federal and state governments should significantly increase funding levels to meet that of other Organization for Economic Co-operation and Development (OECD) countries, shifting from a funding level of 0.4 percent of GDP to at least 0.75 percent of GDP. The National Academies’ committee estimates this would require an increase of $53 billion in public investments, which would be added to the current public investment of $29 billion and anticipated $58 billion from family contributions. These costs should not come at the expense of cuts to other social services but should come from finding new revenue sources from employers, private industries, and businesses; revising tax structures; and creating efficiencies. State level coordinators can act as intermediaries for federal, state, and local funding streams, to lessen the responsibility of braiding and blending funding which is currently placed on providers and families.

Consider new revenue streams to support early education quality. Innovative funding models will be needed if a universal system of early care and education in the U.S. is going to materialize. International early education systems rely far more heavily on private investments. While substantial public funding increases are crucial, investments from business groups and philanthropic organizations can also generate needed revenue to support early education. Employer-sponsored child care can enable parents to access high-quality, affordable, and convenient early education for their children.

Stabilize federal and state funding. Public investments should be predictable and stable, so providers can anticipate staff and facility needs, and so all families can plan their future knowing they will have access to child care. Programs to support child care, like the Child Care and Development Fund, should be treated as entitlement programs, with mandatory appropriations in the federal budget. Entitlement programs, like Pell Grants and Social Security, are popular and tend to be politically protected. Early education deserves the same promise of bedrock durability in federal and state budgets, with flexibility to evolve to changing conditions over time.

Use stable revenue sources to fund birth-to-five programs. Child care centers and family child care providers should be paid by contract, with an agreement that they will maintain 80 percent enrollment so that they have stable and predictable funding, which will better enable them to make quality investments, including in their teachers. Most school funding statutes apply to kindergarten through twelfth grade and do not include pre-K. In some states, pre-K is funded through relatively unstable sources, such as a state lottery or taxes on items like tobacco. Funding pre-K through general school funding streams (or state K–12 funding formulas) not only reinforces that pre-K is part of the public school system but can allow for more stability for these programs.

Shift the burden of funding from families and streamline eligibility. Just over half of ECE funding is paid by families, while the remaining funding originates from public investments at the federal, state, and local level, and a very small fraction derives from philanthropic and private programs. A typical family pays around 10 percent of its income for child care, while families with lower incomes pay up to 35 percent or more of their earnings. Federal and state government should establish a family payment structure on a sliding scale to mitigate the cliff effect, with no-fee access available for families with low incomes. Eligibility standards and enrollment processes should be standardized to more easily provide comprehensive services for early educational, nutritional, and developmental programs for children and families. As access to child care is expanded, research has shown that parental employment will rise. Punitive measures that remove access to care do not serve children, families, or the intended goal of incentivizing parental employment. Access to child care should be fully decoupled from parental employment mandates.

• New America resources:
  • Federal Spending on Early Care and Education: Past, Present, and Future (blog post)
  • Transforming Financing in Early Care and Education (blog post)
  • "Pay for Success" Gaining Traction as ECE Funding Option, But Should It Be? (blog post)
  • Forthcoming (March 2020): Transforming the Financing of Early Care and Education: A Guidebook
• Other resources:
  • The National Academies of Sciences, Engineering and Medicine, Transforming the Financing of Early Care and Education
  • Center for American Progress, The Effects of Universal Preschool in Washington, D.C.
  • Center for American Progress, The Economics of Caregiving for Working Mothers
  • Medium, Yes, America, We Can Afford Universal Child Care
  • Results for Development, Financing Early Childhood Development: An Analysis of International and Domestic Sources
  • Center for the Study of Child Care Employment, Financing Early Educator Teacher Quality
  • First Five Years Fund, Federal Funding for Early Childhood Programs: A Decade of Bipartisan Progress
  • Save the Children Action Network, Innovative Financing for Early Childhood Education
  • U.S. Chamber of Commerce Foundation, Building Bridges: Creating Strong Partnerships for Early Childhood Education
  • Center for the Study of Child Care Employment, Who’s Paying Now? The Explicit and Implicit Costs of the Current Early Care and Education System