Tag Archives: education finance

What’s the Deal with Pre-K Funding in Maryland?

Earlier this month, U.S. Department of Education awarded Maryland a $15 million Preschool Development Grant. This award recognizes Maryland’s history of leadership in providing quality preschool for low-income students — but it could also increase the complexity and fragmentation of the state’s preschool funding landscape.

And Maryland’s pre-k funding structure is complex enough as it is. Unlike any other state, for the past twelve years Maryland has required districts to offer pre-k through the Bridge to Excellence Act (BTE), but it doesn’t have a dedicated pre-k funding stream to fund that requirement. Through BTE, the state completely revised its school finance structure and increased state aid to public schools by $1.3 billion over six years. In return, districts had to provide fullday kindergarten and at least half-day pre-k for students from families with income levels at or below 185 percent of the federal poverty guideline.

Because of the structure of the BTE formula, districts that had the most low-income kids to serve got the biggest funding increases. The new formula distributed 74 percent of the additional state aid inverse to local wealth, so less affluent districts received more aid than more affluent districts. Each school district received a base amount and additional funds based on the number of students who receive special education services, who have limited English proficiency, and who qualify for free- and reduced-price meals.

From the state perspective, the additional state aid should cover the cost of the pre-k requirement. From a district perspective, pre-k is an unfunded mandate: there’s no distinct, dedicated funding stream for pre-k, as exists in many other states. Maryland districts pay for pre-k out of their general state aid pot.

Fast forward to earlier this year. Maryland passed the Preschool Expansion Act, which created a completely different pre-k initiative. Preschool Expansion is a $4.3 million competitive grant program for children up to 300 percent of the federal poverty guideline. Now the federal Preschool Development Grant will fund another pre-k initiative for students up to 200 percent of the federal poverty guideline. That’s three different pre-k initiatives for three different, but overlapping, student populations.

To be sure, additional pre-k money is good news for Maryland students. And yet, Maryland students (and parents, and schools) deserve some reassurance that there’s a coherent strategy in place. Neither the Preschool Expansion Act nor the Preschool Development Grant directly supports the existing pre-k structure in Maryland. Instead, the state piled on two new initiatives right on top of BTE, which was already the third effort since 1980. The result is a fragmented array of pre-k funding options, none of which perfectly align in services, providers, or priorities.

Maryland isn’t alone in this complex pre-k funding system. Louisiana and New Jersey, also Preschool Development Grant winners, have at least three different, concurrently operating pre-k funding streams that tend to merge and separate over time. State policymakers often have political or pragmatic reasons to create multiple pre-k funding streams – but the result falls short of a cohesive strategy and instead leaves a confused pre-k landscape that is harder to navigate, harder to manage, and harder to sell.

The Problem With Building Programs on Sin Taxes

There’s good news and bad news in Arizona right now. The good news: The smoking rates in Arizona are going down. The bad news: Lower smoking rates mean less pre-k funding. $26 million less, in fact.

That’s because Arizona funds pre-k with a tobacco tax. In 2006, Arizona voters passed Proposition 203, which added a 4-cent tax per cigarette to fund the state’s pre-k program and created a statewide office, First Things First, to oversee the program.

Using tobacco taxes – and other sin taxes – to fund initiatives is a politically popular approach. Set aside for a minute that sin taxes are inherently regressive (e.g., the people footing tobacco taxes generally have lower income and education levels). In Arizona’s case, a tobacco tax feels like a win-win: the state introduces an economic incentive to reduce cigarette consumption and funds early education without going through the vagaries of appropriation.

But Arizona’s experience also shows it’s not a long-term solution to funding early childhood education. The smoking rate in Arizona has decreased over the past several years and, with it, funding for pre-k. In FY09, the state’s tobacco tax pulled in $141 million; the estimate for FY14 is $115 million. First Things First stockpiled money in the first few years because it started collecting taxes before it was required to disburse funding, so right now there’s a cushion. But as less tobacco tax money is coming in, dipping deeper into the fund will be necessary.

Which brings us to the problem with building a program on sin taxes: sometimes incentives work. Tobacco taxes are not a sustainable substitute for state fiscal commitment in early education.

To account for the loss in state funding, First Things First is changing their allocation structure. Right now, pre-k funding flows from First Things First to regional councils to pre-k providers. The regional councils, entirely run by volunteer community members, decide which providers get funding. If selected, a provider typically receives a number of state-funded pre-k slots that correlates with the size and quality of their program.

Starting next July, however, those volunteer-led regional councils will determine both which providers get slots and how many slots they should receive. First Things First will fulfill those requests if they can, funding the highest quality providers first, but there’s no guarantee that providers will receive any funding at all. The short-term consequence is uncertainty; the long-term consequence is fewer students being served.

Arizona isn’t the only state with issues funding pre-k through a sin tax. California is facing decreasing tobacco tax dollars, North Carolina and Georgia have had trouble with inconsistent or insufficient lottery revenue, and Arkansas’ beer tax was all over the place for the few years it existed. (President Obama’s Preschool for All initiative is supposed to be funded through a tobacco tax, but smoking trends nationally are also going down.)

Funding state pre-k through a tobacco tax is politically palatable and a fine place to start looking for funding. But if we’re serious about our commitment to early education, we can’t take the shortsighted, easy win — we need to prepare for the eventuality that the money won’t last forever.