Tuesday, October 4, 2016

What Pre-K Our Way Doesn't Say


Pre-K Our Way, an organization committed to expanding state-funded Pre-K in New Jersey, has been covering NJ-policy and news websites with ads for the last year asking New Jerseyans to ask their legislators to put money into expanding Pre-K access to another 50,000 children.

Pre-K Our Way's goal of another 50,000 students in Pre-K is based on the Pre-K component of SFRA, which calls for two years of universal state-funded Pre-K in any district where FRL-eligibility exceeds 40% and means-tested Pre-K for FRL-eligible children living in all other school districts.



Pre-K Our Way has heavy hitters on its side.  Jim Florio and Tom Kean are its co-chairman.  Brian Maher, the former CEO of port colossus Maher Terminals, is a generous contributor.  The organization doesn't lack for powerful friends and money.

As noble as Pre-K Our Way's goal is, the problem with their effort and organization is that they almost never admit how much expanding Pre-K would cost or explain where New Jersey should get the money.

In the above ad, Pre-K Our Way says "for more information," go to their website, but one critical piece of information that isn't on that website is how much Pre-K for another 50,000 kids would cost!

On the contrary.  The Pre-K Our Way FAQs says that Pre-K doesn't cost anything:

From their FAQs:

IS NEW JERSEY’S PUBLIC PRESCHOOL PROGRAM FREE?
Yes. The existing state-funded high-quality preschool programs are available to the public in these fewer than 40 communities at no cost.
No cost?  Since when is the $653 million NJ is spending now for operating expenses alone "no cost"?

Haha, what Pre-K Our Way means is "at no cost (to parents)."  There's no such thing as a free lunch and New Jersey taxpayers pay for our existing Pre-K.  

What Pre-K Our Way is afraid to reveal in their publicity is that their plan for another 50,000 Pre-K would cost nearly $700 million.

Here's the math behind the estimate:

New Jersey provides Pre-K in the Abbott districts through school districts and through private providers, with a majority of children in private centers.
(It's a de facto voucher system.  The private providers can be for-profits and even religiously affiliated. (Yes, there have been scandals.))

Our costs pefor 2017 are:

  • $12,788 per child in a district-run program.
  • $14,375 per child in a private provider-run program.
The math is simple if NJ's 50,000 Pre-K-eligible students went 50:50 private Pre-K:public Pre-K, 25,000 x $12,788 + 25,000 x $14,375 =

$679,075,000

$679,075,000 is huge amount of money.  It exceeds of 2% of the state's total budget and 8% of our K-12 aid.  However, the actual amount would likely be higher due to the tendency of students to choose the more expensive private providers.

(New Jersey's Pre-K costs (and possibly quality) per student are the highest in the country.  By contrast, even New York City only spends $10,200 per student on Pre-K and the national average is only $4,125.)

Talking about 50,000 Kids Sounds Better than
"Spend $679 million!"
New Jersey can (and must) increase taxes to better fund education, but money is finite and zero-sum and more money for Pre-K will come at the expense of some other discretionary program, quite likely K-12 aid and/or higher education.

Higher education is particularly vulnerable since the constituency is smaller than for K-12. Already, NJ's support for public colleges has been eroding.  In 2014, for instance, NJ spent $2.32 billion on higher ed.  For 2017, we will spend $2.2 billion.  (And the per student distribution of aid for colleges is totally irrational too.)




Pre-K Our Way answer to worries about the rest of the budget is that Pre-K saves money in the long-run since students who have it are less likely to be held back and require special services. Extrapolating into students' adulthoods, claims are made that for every $1 spent on Pre-K, $7 is saved.

There's some evidence backing up claims of academic success (though not savings for school districts) in New Jersey from the APPLES study (Abbott Preschool Program Longitudinal Effects Study), which claimed, by 5th grade, that kids who had two years of Abbott Pre-K had a 31% lower rate of sped placement 40% lower rate of grade-retention, and higher scores than students who had had no Pre-K.

However, the APPLES project did not have random selection.  Parents who would not take advantage of a "free" Pre-K program that purports academic benefits may not have the same attitude towards education as parents who do enroll their kids.  Indeed, the APPLES study disclosed that the non-enrolees were poorer, less likely to work, and less likely to speak English at home.

The APPLES researh also found that the gap for special education placement between students who had had one one year of Pre-K versus two was very small.

 A "beautifully designed" Vanderbilt University study that did use random selection found that indeed, at the beginning of kindergarten, poor kids who had had high-quality Pre-K outperformed those who hadn't, but by second grade the positioning was reversed, and the kids who hadn't had Pre-K outperformed on behaviorial and academic measures those who had.

Anyway, when it comes to spending, effectiveness IS IRRELEVANT because there is a difference between savings for a district and savings for the state.

The financial irrelevance of Pre-K spending is that the Education Law Center and Abbott districts have adamantly opposed any reductions in money for K-12.  SFRA only lowered payments to Abbott districts slightly.  If a district is over 60% FRL-eligible and 10% LEP, its Adequacy Budget will be $22,000-$23,000 per student.

MOREOVER, SFRA does not factor in special education placement rates in its formulas for state aid.  All else being equal, a district with a 10% special education rate and one with a 25% special education rate would get the same state aid.  So no matter how effective Pre-K is at lowering special education placements, the state saves no money.  All that happens is that the recipient districts keep more state aid to spend on non-special ed items or offset their taxes.

The ELC and Abbotts want to have it both ways:

  1. They justify Pre-K, in part, by saying it reduces costs later on.
  2. They oppose any reductions in state aid, even though Pre-K is supposed to reduce costs later on.
Perhaps it is cost effective in the long-run for New Jersey to spend another $700 million on Pre-K than K-12, but if so, Pre-K Our Way needs to be honest about where that money is going to come from.  If Pre-K really does save money, then where is the state's "Pre-K Dividend"?  If there is a dividend, it only comes in the adulthood of kids who had Pre-K, who plausibly might need less in transfer payments and have less involvement with the justice system.

New Jersey is Broke

Even if one accepts that Pre-K saves money in the long run and should be considered an investment, there is the dilemma of how a state as broke as New Jersey can find the money for that investment in the first place.

How soon will the meltdown happen?  For FY2016, NJ's pension funds paid out $10 billion, had $800 million in expenses, and only took in $5.4 billion from localities, the state, and active employees.

The most recent projections for when separate funds will go broke are:

  • The Judges' system will go broke in 2022.  
  • State-PERS will go broke in 2024.  
  • TPAF will go broke in 2027.  

The pension funds' unfunded liability is $43 billion.  The math is again simple, unless there is a miraculous bull market or federal bailout, New Jersey's pension funds will be depleted before any "Pre-K Dividend" arrives.

When the meltdown arrives before the Pre-K dividend arrives, how long-term can we afford to be?

Pre-K Our Way also disregards how just three expenses, Pensions, Health Benefits, and Debt Service ("PHD"), consume more or all of New Jersey's new revenue.

Source:
http://www.nj.gov/treasury/omb/publications/17bib/BIB.pdf

There is no new available revenue to expand Pre-K with.  The only ways Pre-K could be expanded are through:
  1. increasing taxes
  2. cutting other expenses.
  3. getting federal aid.

Should New Jersey raise taxes when it already has the highest taxes in the country?   Given the irrevocable nature of pension benefits, shouldn't we put all new money into pension funds?

What about cutting other spending?  Education spending has risen to 38% of the budget from 31% of the budget since 2000, and despite that, K-12 education is severely underfunded.  New Jersey's property taxes are double the national average, and taking money away from state aid means that our property tax crisis will not let up.

Expanding Pre-K might sound noble, but it's an expense that New Jersey can't afford unless there is federal help.  Any money that would go towards Pre-K would have to be taken away from our deteriorating pension funds and/or programs that benefit other sectors of the New Jersey population.

Eight years ago (when SFRA was passed) middle class and working class towns were promised state aid and tax relief.  Today, 140 districts get not even 50% of the K-12 aid SFRA recommends.  20% of New Jersey districts don't even offer full-day kindergarten, let alone Pre-K.  The most underaided towns are in downward spirals exacerbated by inferior services and excess taxes.

Eight years later they're still waiting too.

As Pre-K Our Way would say:

That's not right.


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