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Cost-Effectiveness and Trade-Offs in Early Education

Sara Mead — Thu, 15 May 2008 18:58:00 -0400

Two new studies released this week aim to help policymakers make sound choices about early education investments.

In Meaningful Investments In Pre-k, researchers from the Institute for Women’s Policy Research estimate what it actually costs to provide quality pre-k programs. To estimate the costs of quality pre-k programs, the IWPR researchers identified the characteristics of high-quality pre-k programs—qualified teachers, small class sizes, appropriate educational materials, and so on—and arrived at research-based estimates of what it actually costs, on a per-child basis, to provide those things. They also estimated the cost of appropriate facilities and of state-level support and oversight infrastructure needed to ensure pre-k quality.

The researchers estimated the cost of pre-k at a variety of quality levels, varying quality in terms of both teacher qualifications/compensation and class size. They also estimated the difference in costs of half-, full-, and extended-day programs. Estimates ranged from a low of $3,214 dollars per child, per year for half-day pre-k programs taught by teachers with a CDA (a child development credential that is less than an associate’s degree) in classrooms of 20 students, to a high of $13,649 per child, per year for extended-day pre-k programs, taught by bachelor’s degree teachers paid under public school salaries, in classrooms of 15 students.

The sad reality is that most states are spending nowhere near this much money per pupil on pre-k, even compared to more modest quality standards. Pre-K programs in 10 states are spending less than even the $3,214 per child IWPR estimates is necessary to provide just the lowest-quality pre-k! The National Institute for Early Education Research estimates that only 19 states are spending enough money to meet quality standards, and all but 4 of those provide only half-day programs.

Fortunately for policymakers seeking to raise quality, the IWPR study also provides estimates of the marginal cost to improve state pre-k quality standards. For instance, for a full-day program with associates degreed teachers and classes of 17 students, it would cost about 12 percent more to raise teacher education requirements to a bachelor’s degree, while it would cost about 8 percent more to reduce class size to 15. These estimates can be useful for policymakers weighing the costs of different policy alternatives.

What the IWPR study doesn’t provide, however, is information on cost effectiveness of different quality improvements: That is, if I’m a legislator seeking to improve pre-k quality or access in my state, what investments give me the biggest bang for my buck? Should I invest marginal dollars in class size reduction, or on raising teacher credentials, or should I leave quality be and increase the number of children served?

A recent RAND paper on the Economics of Early Childhood Policy notes the lack of adequate evidence to answer these questions. We know what the characteristics of high-quality programs are and, to some extent, what they cost. We also know that very high-quality programs have been demonstrated to have clear impacts in terms of improving children’s school and long-term outcomes, and generating positive returns for society as a whole. But we don’t know what kind of returns marginal investments in improving quality produce, nor do we know which marginal quality improvements produce the greatest marginal benefits. We also don’t know whether or not there is a minimum threshold for quality below which early educational investments do not produce positive returns. These are critical questions for policymakers seeking to make smart early education investments with limited public resources. Developing better evidence on cost-effectiveness of different marginal early education investments should be a research priority for the early childhood field.

The RAND report is worth a read because it steps back from the common rhetoric about return on investment from early education programs to take a hard look at the economic theory of what we mean when we say that early education programs produce returns on public investment. Researchers Rebecca Kilburn and Lynn Karoly also dive into the tough questions of trade-offs that policymakers must make between different types of early childhood investments, as well as between quality and quantity for any given early childhood investment, and offer a variety of frameworks for researchers, advocates, and policymakers to think about these investments. Ultimately, they conclude that policymakers need to think about early childhood investments as a portfolio, allocating funds to a variety of strategies that contribute to desired outcomes for children, rather than focusing on a single approach or considering early childhood programs in separate, isolated silos.

One of these studies answers some important questions that policymakers have in creating early education programs, but in the process, it also raises some. The second study raises similar challenging questions, as well as some others around trade-offs for early education, and, while it does not provide answers, offers some useful frameworks to start working on them.

California Supreme Court Overturns Gay Marriage Ban

Joe Mathews — Thu, 15 May 2008 18:22:00 -0400

The ruling is here. The AP story is here. I'll leave the legal analysis to the lawyers, and offer a political explanation. This ruling invalidates Prop 22, the 2000 ballot initiative that barred same-sex marriage in California. And it likely means that local officials around the state will permit gay and lesbian couples to marry. Such marriages will raise this issue's profile politically, both in California and in the presidential race. All eyes this fall should be on the November initiative in California to establish a state constitutional ban against gay marriage.

Loans of Last Resort: A Program Only Rube Goldberg Could Love

Ben Miller — Thu, 15 May 2008 15:58:00 -0400

The Department of Education recently announced modifications to its lender of last resort program as part of its effort to prepare for the possibility of federal student loan shortages as a result of the credit crunch. The net result is a contraption Rube Goldberg would be proud of -- what in effect are direct student loans that are more difficult to administer and more costly for taxpayers than the regular Direct Loan program.

The lender of last resort (LLR) program is designed to ensure all students have access to Federal Family Education Loans (FFEL) by requiring that guaranty agencies provide loans to students that have been turned down by conventional lenders. Though we support guaranteeing access to student loans, the similarities (and costly differences) to the regular Direct Loan program make LLR a significantly inferior option. In fact, Washington appears to be trying to avoid the more obvious and efficient solution -- boosting the regular Direct Loan program.

Here are five similarities between the new but hardly improved LLR program and the regular Direct Loan program:

Federal Guarantee: While the government reimburses lenders for 97 percent of a FFEL loan that goes into default, it is on the hook for 100 percent of an LLR loan. Since Direct Loans are obligations from the U.S. Treasury, they effectively have a 100 percent guarantee.

Funding Source: The Secretary of Education is permitted to advance U.S. Treasury funds to guaranty agencies for the purposes of making LLR loans. The Department disburses Direct Loans using Treasury funds.

Terms and Conditions: According to the Department of Education, borrowers who take out an LLR loan will have "the same rights, benefits, and obligations" as those who receive FFEL loans. Federal law also requires that Direct Loans have the same terms and conditions as those offered through FFEL.

School-wide Eligibility: Currently, student loan applicants become eligible for a LLR loan only after they have been turned down by two FFEL lenders (only one in some states). However, under the recently signed Ensuring Continued Access to Student Loans Act of 2008, the Education Secretary will be able to designate whole institutions as eligible for LLR loans. Schools using Direct Loans also receive institution-wide eligibility.

Loan Ownership: Similar to Direct Loans, LLR loans made with advanced Treasury funds are assets of the U.S. government.

So let's get this straight. Under the LLR program, loans would be made with Treasury funds and have the same terms and conditions as FFEL loans. They would carry a 100 percent guarantee, and could be granted on an institution-wide basis.

If it looks like a Direct Loan and it functions like a Direct Loan...

But the LLR program isn't a carbon copy of the regular Direct Loan program. In fact, the Department has added provisions that make the program more complicated and costly to taxpayers, such as:

Requiring Additional Federal Payments: With the regular Direct Loan program, the government's initial expenditure is equal to the principal of the loan. But under LLR, the Department would provide a fee to a guaranty agency for "originating and servicing LLR loans made with advances." The government would thus provide money to make the loan and then give the guaranty agency MORE money to agree to originate a loan with ZERO default risk.

Designating the Debt as FFEL Loans: As we noted earlier, borrowers have nearly the same terms under the two federal student loan programs, with at least one notable difference: Direct Loans can be partially forgiven for public service. Under the Department's LLR plans, however, the guaranty agency must assign to the Secretary any loans made with federal advances that she requests. These assigned assets will still be considered FFEL loans, meaning a borrower could end up with a loan owned by the government with inferior terms to other Department-held loans.

A K.I.S.S. for the Department

The Department has put a lot of effort into ensuring the LLR program functions properly. But is it worth the trouble? The government has never put LLR to use on a wide scale before. Do schools really want to put their trust in an unproven system? A regular Direct Loan could provide better terms for borrowers, with the same financing source, school-wide eligibility, and guarantee rate -- without having to make additional payments to other agencies.

If this is the general direction the Department wants to pursue in response to the credit crunch scare, it should follow a lesson we all learned in elementary school -- when faced with complex problems, the best solution is to keep it simple, stupid.

Arnold Is "All In" On Budget Reform

Joe Mathews — Wed, 14 May 2008 18:32:00 -0400

This is also posted at Fox and Hounds Daily, a new news and commentary site focusing on California and business.

There is no longer any doubt about one thing in California politics: Gov. Schwarzenegger is willing to die on the cross of budget reform.

My conversations with people inside and outside the administration, and a review of news leaks in advance of the governor's revised budget proposal this afternoon, make it clear that he is doubling down on budget reform. For a man with a reputation for twisting with political winds, he is doing the opposite here, trying again to pursue reforms as he did in 2004 and 2005. He is so determined to get voters to adopt his budget reform (a spending-side proposal based on a rainy day fund and more power for governors to make mid-year cuts) that he is risking what's left of his governorship.

One piece of this approach is undeniable smart, As the Sacramento Bee reports, he's pulled back from his proposal to include education in spending cuts and is now proposing to meet the Prop 98 minimum on education. His cuts were fiscally responsible -- but they were politically poisonous to his project of budget reform. By dropping the unpopular cuts, he is making a strategic move that signals his top priority--budget reform or bust.

The "bust" in this case is the promise-breaking sales tax increase he's offering as a back-up to his budget reform plans. One note here: the LA Times today reports that if the governor is going to ask voters to approve a privatization of the lottery. If they don't, the back-up plan will be a one-cent sales tax increase. Two trusted sources tell me, however, that Schwarzenegger sees more than just the lottery going on the ballot; he wants his budget reform proposal there, too. The one-cent sales tax will be pitched as the back-up to the whole package.

The risk here is that by putting things on the ballot, he could effectively extend a difficult, contentious, popularity-sapping budget season all the way into November. His popularity is already falling; if things don't go well, he could be in George W. Bush - Richard Nixon territory by fall. And if his reform loses and he gets a tax, he'll likely lose what's left of his Republican base. But he's going forward anyway. With this approach, Schwarzenegger is giving California his most straightforward assessment: he think there's literally nothing more important (even his own political career) than changing the way the state manages its budget. It's classic Arnold: high-risk, big, and structure in a way to produce a lot of attention. His specific policy may be right or wrong, but either way, it will make a hell of a movie. Attention Californians: Your governor is jumping off a cliff without a parachute.

Google Makes Case for Geolocation

Ben Lennett — Wed, 14 May 2008 16:59:00 -0400

In a recent post on their public policy blog, Google expands upon their geolocation proposal for the television white spaces:

We believe it's possible to marry the benefits of mobile devices for consumers with the protection of fixed devices for TV broadcasters and other incumbent users of this spectrum (including wireless microphones) -- in part by using geolocation technology that would prevent a white space device from transmitting over channels that are in use.

Some observers, particularly in the public interest community, have asked whether geolocation might compromise the promise of the TV white spaces, particularly with regard to "mesh networks." Happily, this need not be the case. In a new white paper, we explain how our proposals can provide the protections afforded to incumbent users by geolocation, without significantly limiting the promise of mesh networks. We also describe how this technology can support use by the public service community in times of natural disasters and in other emergency situations.

POLITICS: What's The Matter With Kansas and Every Place Else?

Joanne Kenen — Wed, 14 May 2008 16:15:00 -0400

Health Affairs, as you know if you've read us or any other health policy blog this week, devoted its May/June issue to health reform, and held a forum on health politics in DC this week. (Merrill Goozner did a nice summary including an update of what the Congressional Budget Office is doing to gear up for health reform.) They also did a conference call recently summing up the political landscape with Bob Blendon of Harvard's Kennedy School and School of Public Health, Julie Rovner of NPR and Robert Laszewski, of Health Policy and Strategy Associates Inc. and the Health Care Policy and Marketplace Review blog. Here's a recap from the Health Affairs blog, and here's the transcript.

Blendon pointed out that most voters are not college-educated and will not be voting based on the minutiae of policy plans; they want a debate about the big picture on topics like health care, trade etc. Laszewski thought that John McCain was vulnerable because people wouldn't have much faith in his approach to covering the sickest, hardest to insure people; Democrats, he said, would be able to depict it as another health care "train wreck."

An interesting tidbit from Rovner who found a surprising level of support for single-payer in Kansas of all places. “It’s not just a matter of people wanting the security of what they have now. People, if anything, want to go more towards the government and less towards the market.” Rovner was “not suggesting that there is a groundswell of a majority for a single-payer system. But I am suggesting that as people see costs go up, I think they are looking more towards the government and less towards the private market as a way to protect themselves.”

(I should disclose that Bob Blendon has answered approximately one zillion questions from me over the past 15 years and taught me a great deal of what I know about health politics and Julie is my pal.)

Hey You Guys!!!!!!!!!

Sara Mead — Wed, 14 May 2008 13:45:00 -0400

The New York Times reports that PBS is bringing back The Electric Company, a beloved 1970s-era children's television show that uses SNL-style sketches to help children develop literacy skills. The Electric Company was produced by Children's Television Workshop (since renamed Sesame Workshop, which will be producing the new show), the same organization that produces Sesame Street. While Sesame Street is focused on preschool aged students, The Electric Company is pitched to early elementary school students ages 6 to 9. Among other accomplishments, The Electric Company launched the career of Morgan Freeman, appearing here as recurring sketch character Easy Reader.

No word yet on whether Easy Reader will make a reappearance in the new show (possibly reincarnated as a Greenpoint hipster?), which producers are reconceptualizing in an effort to appeal to children who now have a much greater wealth of afterschool entertainment options.

As the most recent Future of Children noted, TV-watching per se isn't necessarily bad for preschool (over two years old) and elementary-aged children (although all things in moderation). And quality educationally-oriented programs can actually have positive impacts on children's learning. Sure, kids today have a lot of entertainment options--Nickelodeon, Cartoon Network, DVDs--that didn't exist in the 1970s. But a lot of what's out there is the intellectual equivalent of empty calories--not to mention the many non-age appropriate things kids can find on afternoon TV these days. Parents and policymakers are concerned about protecting children from bad influences on TV and in the media, and debates about how to do that can become contentious. But unfortunately we tend to overlook the equally or more important flipside--providing engaging entertainment alternatives that children will find just as or more appealing than less salubrious options, while also reaping educational benefits. In that context, the return of The Electric Company is something to celebrate (and not just because I enjoyed watching it myself as an elementary schooler!).

No word yet, however, on when we can expect a reappearance of 3-2-1 Contact. Given that they've been namechecked by a well-known indie rock band, would it be too much to hope for the Bloodhound Gang to get their own show?

COST: Want It 'Made in America?' Fix Health Care

Joanne Kenen — Tue, 13 May 2008 19:58:00 -0400

Representing the economically troubled state of Michigan, home to the auto industry, Democratic Sen. Debbie Stabenow just has to look around her to see how sky-high health care costs have eroded the global competitiveness of U.S. industry. Still, she told a New America-sponsored forum on Capitol Hill the other day, it's "nice to be joined by the data in something that I have been talking about for a long time."

Stabenow, the opening speaker at our forum about employer health costs in a global economy, described how the "most expensive and crazy structure in the world"—aka the U.S. health care system—was damaging the economy, hurting industry, threatening the middle class. "We are literally losing jobs," she said, spending more than our competitors on health but having less to show for it. (Click here for the webcast, here for the study, here for our earlier post.)

Stabenow, a cosponsor of the bipartisan Healthy Americans Act also known as the Wyden-Bennett bill, took issue with lawmakers (presumably including presumptive Republican presidential nominee Sen. John McCain) who say that we have to tackle cost before coverage. "You can't get to cost," Stabenow said, unless you also deal with the uninsured who show up in emergency rooms, who can't get access to decent primary care. The two are related.

"I want to deal with access. I want to deal with cost," she said, adding that she wants America and its trading partners to be in a race to the top, not a race to the bottom. To get to the top, to preserve the middle class and improve the economic wellbeing of our trading partners as well, we need to fix health care.

The challenge is both moral and economic. "This isn't working," she said. "We're spending way too much for the results we're getting. We're losing jobs and fundamentally this is about who we are as Americans. We can do better in the greatest country in the world."

LATimes Supports New America's Retirement Bill

Rourke OBrien — Tue, 13 May 2008 19:47:00 -0400

The Los Angeles Times published an editorial today in support of Assemblyman Kevin de Leon's plan to provide workers who are not eligibile to participate in an employer sponsored plan access to a safe retirement savings product.

This is obviously a major boost to New America's efforts to create a voluntary, portable, low-cost, high quality retirement account structure for all workers in California. See this previous post for more.

Stay tuned for updates as this important (and ambitious) proposal travels through the state legislature en route (we hope!) to the Governor's desk.

The Rich Will Always Be with Us

Mark Paul — Mon, 12 May 2008 22:26:00 -0400

Like generals who are always fighting the last war, California's pundits are still fighting their way out of the last budget crisis. Latest case in point: George Skelton of the Los Angeles Times, who recently complained again that California's income tax "depends too heavily on the wealthy." In Skelton's world, the wealthy are just like those men mothers always warn their daughters about: they'll show you a good time, and then disappear, leaving you heartbroken. "Their incomes rise and fall steeply with the economy," he writes, "and therefore so do state budget deficits."

Except that's not why California has a budget crisis. As the state controller reported on May 9, personal income tax collections for the first nine months of the current budget year are $1.4 billion over the estimate in Gov. Schwarzenegger's January budget and within a whisker of the amount budgeted last summer. Through the first nine months California revenues are up 1.2 percent over a year ago, thanks entirely to the income tax, which has more than made up for the decline in sales tax revenues caused by the housing crash.

The pundits' obsession with the volatility of income tax revenues is a holdover from the past. In 1999 and 2000 the incomes--and income tax payments--of the wealthy, powered by huge capital gains and stock option grants during the Internet stock market bubble, soared. Then they fell back to earth in 2001 and 2002, dragging California into a budget crisis. But as I've explained in more detail elsewhere, the bubble and its subsequent popping were an unprecedented event. Just look at the chart below, showing California's four largest sources of general fund tax revenue over the last three decades.

Uploaded with plasq's Skitch!

Take out the bubble years, and revenues don't resemble a "roller coaster," as Skelton puts it. They rise when the economy grows and flatten out when it shrinks, as it did in the sharp recession and restructuring that hit California in the early 1990s. Charts of federal revenue, also dependent on income taxes, show the same pattern. The Internet boom was an anomaly.

But let's suppose for a moment that it wasn't. What would the pundits do so that California no longer "depends too heavily on the wealthy"?

Raise taxes on the poor and middle class? According to an analysis done for the California Budget Project by the Institute on Taxation and Economic Policy, low- and middle-income households already pay a higher percentage of their incomes in state and local taxes than do those in the top 1 percent.

Cut income tax rates on the wealthy? California has already done that. The state had top marginal rates of 10 percent and 11 percent on the wealthy through the 1970s, most of the 1980s, and some of the 1990s, but lowered them to 9.3 percent (in 2004 voters added, by initiative, an extra 0.7 percentage points on incomes over $1 million, with the funds earmarked for expanded mental health care.) Yet the amounts collected by the income tax continue to grow.

Why? Because of an underlying economic shift the pundits rarely mention: California gets an increasing share of its budget from income taxes on the wealthy because that's where all the money is. According to California Franchise Tax Board data, in 1979 the top 10 percent of taxpayers had about one-third of the state's total adjusted gross income. In 2005, their share had grown to roughly half.

If the pundits know a way to balance the budget, reduce the share of taxes paid by the wealthy, and not widen this growing income gap between the wealthy and everybody else, they should let us in on the secret.