Defining Nebraska’s Investment in Early Care and Education

Feedback from Nebraska’s early childhood workforce made clear that we cannot recruit and retain the number of qualified early childhood professionals we need in Nebraska without ensuring adequate compensation and support for the workforce. But we cannot raise wages for the early childhood workforce without considering the impact this may have on other sources of funding for early care and education. The question of how to cover the costs of ensuring adequate compensation for the early childhood workforce without raising the already heavy burden of cost for parents is dependent on addressing several other challenges related to funding quality early care and education across the state.

For example, until recently, we had not fully recognized the total cost of early care and education, let alone the total cost of quality programs staffed by qualified professionals. Confounding this problem, there is a significant difference between the sources of funding for the care and education of children from birth to Kindergarten entry and the sources of funding for children in Kindergarten through Grade 3.136 In the United States, families pay most of the care and education costs for children under age 5. By comparison, public K–12 education is delivered with few or no fees charged for families; instead, the costs are shared by all Nebraska citizens. Because of this distinction, there is tremendous urgency to addressing gaps in funding for service delivery to children from birth to Kindergarten entry.

To better understand these challenges, commission members asked for more information about Nebraska’s investment in early care and education. Working with partners, the Institute:

• Estimated Nebraska’s public investment in early care and education. The money that finances early care and education comes from both the public and private sectors. Public-sector contributions include federal, state, and local government funds. To establish estimates of Nebraska’s total investment in early childhood education, we conducted a detailed study examining federal- and state-level sources of public funds for Nebraska’s early care and education system. This study, Nebraska’s Public Investment in Early Childhood Care and Education, Fiscal Year 2017, 137 was led by the associate director of workforce planning and development at the Institute and a Nebraska early childhood policy consultant, with assistance from the Nebraska Departments of Health and Human Services and Education and the Nebraska Children and Families Foundation. The FY 2017 report—the first in a series—outlines the flow of public dollars through Nebraska’s early care and education system. The purpose of this research was twofold: to describe the methods used to establish an estimate of the federal- and state-level public-sector contributions to Nebraska’s total investment in early care and education and to establish a baseline so we could follow change in public investments over time. Figure 11 shows a simplified version of the funding flows, demonstrating the complex system of finance mechanisms that early childhood professionals must comply with to maintain stable revenue and successful businesses.

This figure presents a simplified illustration of what is actually a complex patchwork that stitches together federal and state funds allocated for early care and education. Mechanisms to fund early care and education have emerged through incremental policy changes targeted at specific goals. The resulting funding structures are often inflexible, siloed, and inefficient.

Access to as many funding sources as possible is a lifeline to keeping early childhood program doors open and lights on, but the process of acquiring and braiding funds is burdensome to maintain and complex to master. Time and energy that professionals would otherwise make available to children and families must be devoted to the administrative task of securing and combining separate sources of funding to generate enough revenue to cover the cost of providing early care and education.

FUNDING STATE SOURCES

$76.7 MILLION IN STATE FUNDS

Office of Early Childhood

Financial & Admin Services

ESEA/ESSA

Office of Special Education Nutrition Services

Public Health

Children & Family Services

FEDERAL SOURCES

$134.7 MILLION IN FEDERAL FUNDS

U.S. DEPARTMENT OF AGRICULTURE

Food and Nutrition Services

U.S. DEPARTMENT OF EDUCATION

Office of Student Services

Office of Special Education

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Child Care

Office of Family Assistance

Office of Head Start

CCDF, State

Early Childhood Education Grants Program

Early Childhood Provider Scholarships and Bonuses

NDE Administration of Early Childhood Programs

NDE Flow-Through Provider Fees

Nurturing Healthy Behaviors

Sixpence Endowment Income

Sixpence General Fund

TEEOSA

CACFP

CCDF, Federal

Head Start/Early Head Start

Child & Adult Care Food Program Sponsor

Early Childhood Grants Program Administrator

Educational Service

Units NE Association for the Education of Young Children

NE Children & Families Foundation School Districts

Sixpence

Tribal Governments

PROVIDERS

HEAD START braid up to 6 sources

HOME VISITORS braid up to 2 sources

LICENSED CHILD CARE CENTERS braid up to 8 sources

LICENSED CHILD CARE HOMES braid up to 8 sources

LICENSE-EXEMPT CHILD CARE HOMES braid up to 4 sources

SCHOOLS braid up to 10 sources

TANF

4

Government funding is allocated through various finance mechanisms. These mechanisms originate from federal and state agencies that have distinct regulatory standards, compliance monitoring, and qualifications requirements. Mechanisms originating from federal agencies are administered through corresponding state agencies. Head Start is a notable exception.

State agencies delegate management of adhering to the requirements of specific finance mechanisms to the entities identified here as program administrators.

Providers must demonstrate eligibility to receive funds and document that they are in compliance with the requirements of applicable finance mechanisms. Program administrators deliver funds to eligible providers that demonstrate compliance.

Certain finance mechanisms are administered at the agency level and distribute funds directly to providers.

• Estimated Nebraska’s total investment in early care and education, including private-sector contributions. Private-sector contributions to early care and education are primarily made up of the tuition and fees charged to families for services rendered but also include funds from business and philanthropic communities. Once we estimated the public-sector contribution to early care and education in Nebraska, we applied evidence-based assumptions to our public-sector data to derive figures for the total investment, including contributions from the private sector. From this, our research showed that Nebraska’s total investment in early care and education is estimated to be $459.6 million annually, with 46% ($211.4 million) coming from the public sector and 54% ($248.1 million) from the private sector. The public-sector contribution is less than half the total contribution in Nebraska. As a proportion of the total investment, the proportion contributed by the State of Nebraska makes up just 17% of the total costs, assuming that the state/federal split shown in 2017 data would be maintained over time. The federal government and families carry the largest share of the fiscal burden in Nebraska by far.

• Estimated the total cost of funding quality early care and education in Nebraska. Following recommendations outlined in the Transforming report,35 the commission elected to examine funding needs with the goal of understanding what is required to cover all costs associated with quality early childhood education. This approach, referred to as a quality-oriented, cost-based approach, places the emphasis on developing funding levels to cover the cost of quality for all children instead of determining quality and access solely by available funding. According to the National Academy of Sciences’ report, Transforming the Financing of Early Care and Education, 136 the cost of fully funding early care and education in the United States is three-quarters of 1% of the nation’s gross domestic product (GDP). To arrive at an estimate for Nebraska, we applied this multiplier to the state’s GDP. Based on the size of Nebraska’s 2017 economy of $110.5 billion, the estimated total cost of high-quality early care and education approximates to $911.9 million annually.

• Estimated the gap between Nebraska’s current investment and the full cost of funding quality early care and education. Given the total annual investment in Nebraska of $459.6 million, Nebraska is not quite halfway toward a fully funded quality early childhood system ($911.9 million). The commission called for Nebraska to pursue a fully funded system over the next 10 years and provided illustrations for a phased approach to achieving this goal as suggested by the National Academy of Sciences report (Figure 12).