Photo: Kate Samp for Strategies for Childen.

What’s the best way for states to pay for pre-K programs?

Should states use grants or tap into their K-12 funding formulas?

These are the questions posed by Aaron Loewenberg in a recent New America blog post, but the answers depend on whom you ask.

School funding formulas

“One obvious approach is to incorporate pre-K into the existing K-12 school funding formula,” W. Steven Barnett and Richard Kasmin wrote in an article published last year in The State Education Standard, the policy journal of the National Association of State Boards of Education.

Like the one used here in Massachusetts, state funding formulas calculate the cost of educating a “typical” student. The formulas then make adjustments to account for the added expense of educating students who have more needs, including students who have disabilities, come from low-income families, or are English language learners. (Massachusetts is currently debating changes to its school funding formula, and bills to do so have been filed by Governor Baker, and the House and Senate.)

Barnett and Kasmin write that 11 states use their funding formulas to cover preschool, but only three of these states — Oklahoma, Washington, D.C., and West Virginia — cover a full day of preschool.

“…we find,” they note, “that programs in states that are already using the K-12 funding formula for pre-K clearly have benefitted, including weathering the Great Recession much better than pre-K programs in other states.”

Grant funding

Instead of stretching K-12 funding formulas to cover preschool, some states use grants.

“For the vast majority of states that do not fund pre-K through their K-12 funding formula, pre-K programs are funded through discretionary grants set through the legislature’s regular budgetary process,” New America says.

“To fund pre-K, states typically use general revenues that are generated through sales taxes, individual income taxes, and other taxes and fees. Some states have a dedicated revenue source that is specifically reserved for pre-K; for example, Georgia’s pre-K program is funded through funds collected from the state lottery.”

There are three challenges to this approach:

• “when an unforeseen economic downturn, such as the Great Recession, occurs, legislators will have less revenue to dole out and pre-K programs are likely to see a decrease in appropriated funds”

• relying on grants “also means funding levels are subject to the changing priorities of the legislature. Lawmakers might decide it’s more important to cut the income tax rate rather than maintaining funding for pre-K programs,” and

• discretionary grants “have no way of ensuring that funding amounts automatically keep pace with inflation unlike many state funding formulas”

The good news is that there are also advantages to using grants. New America points to Elliot Regenstein of Foresight Law and Policy, formerly with the Ounce of Prevention Fund, who argues that “grant funding can allow for much more flexibility to meet the needs of certain providers when compared to formula funding.”

And in communities “where high-quality pre-K is more expensive than a formula would cover,” grants can be increased to meet the additional costs. “Grants also tend to encourage greater accountability because they require more information to be disclosed about how exactly funds are used.”

Between funding formulas and grants, the best choice is…

… to stay tuned. Expect to “hear more about the pros and cons of funding pre-K through funding formulas as the new state legislative sessions get going and 2020 presidential hopefuls begin to tout the benefits of increased pre-K funding,” New America says.

Amy O’Leary, Director of Strategies for Children’s Early Education for All Campaign, echoes this idea by focusing on the overarching goal of sustainable funding:

“Massachusetts,” she says, “needs dedicated, annual funding to expand preschool, and it needs to be phased in and grown over time to meet the high demand that we see in communities. The state could start by expanding grant funding, and consider including pre-K funding in the updated school funding formula. Districts that receive new funds from the updated formula would have the flexibility to invest in high-quality preschool.”

New America comes to the positive conclusion that:

“Wherever you fall on the debate between funding pre-K through state funding formulas versus grants, the good news is that pre-K funding is starting to generate debate and make headlines across the country.”