Early childhood education (ECE) has strong public and legislative support. The challenge is paying for it.
Now a new brief – “Innovative Financing for Early Childhood Education” — highlights a number of different funding approaches.
Finding up-front financing is crucial, because investments in early education end up paying off. As we’ve blogged, the return on investment can be as high as $13 for every $1 spent.
“Our group proposes specific action to expand upon what is ‘right’ with existing tax policy and to create new incentives that promote state, local and private collaboration,” the brief says. It was released by the Early Childhood Education Action Tank, a coalition that includes Save the Children Action Network and the First Five Years Fund as well as financial and business institutions.
“There is one area in which our social safety net is conspicuously lacking: helping low-income parents afford high-quality early learning services and care for kids from birth through age 5.”
“At its root,” the brief adds, early childhood education “is an economic issue that can assist in breaking the cycle of poverty. Research has shown that investments in high-quality ECE offer potential for long-term economic impact and growth.”
“Despite this evidence, fewer than half of low-income children in the U.S. have access to quality ECE programs. To change this dynamic, we must identify the resources to bring these education-based interventions to scale to ensure all children have access to quality ECE.”
The brief points to several strategies, including:
• expanding federal tax credits and deductions
“The federal government provides approximately $3 billion annually in tax credits to individuals and employers supporting early child care and education.5 By modifying the structure of these credits, it is possible to greatly expand their value and give more children access to quality early education and care programs, especially those from middle and lower-income families.”
• expanding municipal and private activity bonds
“…expanding the use of federally tax-exempt municipal bonds and private activity bonds (PABs) could drive more private dollars toward the construction of and improvements to the facilities in which early learning takes place.”
• social impact financing – also known as pay for success
“Private sector investors pay the upfront costs to expand the social service; in this example, the number of children enrolled in ECE programs. A third-party evaluator determines if the goal defined by the government has been met. If the goal has been achieved, the government repays the investors with a return on their investment based on the amount of money they will have saved from fixing the social problem, in this case, having more children achieve success in third grade and not needing remedial reading services.”
• early education/higher education parity
“There are 14 tax benefits available for college students and their parents to help pay for higher education, but the federal government does not currently offer benefits of similar value for the families of pre-K aged children despite the rapidly rising costs of early learning programs. As Congress considers comprehensive tax reform, we recommend extending similar tools to parents with younger children to offset rising costs of early childhood education.”
• expand the maternal, infant and early childhood home visiting program
“Research shows that evidence-based home visiting works, ultimately resulting in impressive two-generational outcomes that yield cost-savings to the federal and state governments.”
• pre-K scholarship tax credit
This is based on “Pennsylvania’s ‘Educational Improvement Tax Credit Program,’ which has been wildly successful in spurring private sector investment in education. In Pennsylvania, businesses can receive a tax credit equal to 75% of their contribution to an approved entity up to a maximum of $750,000 per year (lower amounts for scholarship organizations), and the credit increases to 90% for multi -year commitments.”
The brief adds:
“It is our hope that these tools will help break down the two greatest barriers to early childhood education: cost and lack of access to quality programs. In doing so, our nation would close a major gap in our social safety net and empower the next generation to achieve prosperity for themselves and their families to come.”