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Reason Foundation

San Francisco Chronicle

Universal Preschool Is Inviting Universal Disaster

Reiner's plan is failing in Quebec, won't work in CA

Shikha Dalmia and Lisa Snell
December 4, 2005

Ideas that seem great in theory are often a disaster in practice. California's Preschool for All initiative being pushed by director-turned-child advocate Rob Reiner is just such an idea.

This is not mere ivory-tower doom-mongering. This is what a sober assessment of a similar universal day care program in Quebec suggests.

If Reiner's initiative is approved in June, individuals making more than $400,000 a year ($800,000 for families) will face a 1.7 percent tax increase to raise $2.5 billion to finance three hours of free preschool a day for all of California's 4-year-olds — even the 62 percent who already attend preschool without universal subsidies.

Reiner's initiative is a statewide version of Proposition H, the universal preschool program that San Francisco voters approved in March and that will be started in 22 preschools clustered in four low-income communities in a few months. It authorizes $20 million from the city's general funds over five years for public schools to offer pre-school services.

The arguments Reiner and San Francisco child care advocates make are identical to the ones made in Quebec eight years ago. They claim that an investment in preschool will pay for itself not once, but many times. A Rand Corp. study estimates that every dollar spent on preschool will yield $2.50 in savings for the state by, among other things, boosting graduation rates and diminishing juvenile crime.

Setting aside the inherent difficulty of accurately quantifying such nebulous and distant benefits, such calculations inevitably underestimate the ultimate bill because they don't take into account the inflationary pressures that the program itself creates.

The final price tag for Quebec's day care program is 33 times what was originally projected: It was supposed to cost $230 million over five years, but now gobbles $1.7 billion every year.

With this kind of spending, one would think that Quebec was offering top-notch day care to every tot, toddler and teen.

Think again.

Much of the increased spending has gone not toward increased access, but increased costs. Day care worker unions, on the threat of strike, negotiated a 40 percent increase in wages over four years. The cost of care has doubled since the program began, with the annual per-infant cost now exceeding $15,000.

Besides unions, the other major reason for the skyrocketing costs is that when people don't pay the full price for a service, they consume more of it — what economists call the problem of the moral hazard: Quebecois taxpayers pay 80 to 90 percent of the cost of care, requiring parents to pitch in only $7 a day.

Such low co-pays have encouraged mothers who might otherwise have stayed at home with their newborns to return to work. But any hope that the program would be able to meet the demand that it created was doomed right from the start, because it banned new centers and barred existing ones from participating, decimating the private day care market. (It has since reversed this policy). Literally overnight, long lines of desperate parents vying for a "free" day care spot emerged. Parents registered babies yet to be conceived. And when they did land a spot, they paid their $7-a-day to hold it — even if they were months away from using it.

But perhaps the most shocking part of Quebec's program is that it is reinforcing the very inequities it was meant to eradicate.

Many low-income parents, who lost their child care tax deductions in order to finance the program, have been crowded out by middle- and upper-income parents more savvy at negotiating the system. According to research by Peter Shawn Taylor for the Canadian Taxpayers Federation, half of Quebec's day care spaces are taken by families in the top 30 percent income bracket.

Is there any reason to believe that California will dodge Quebec-type cost overruns or shortages or inequities? None whatsoever.

It is true that California's program will be for only 4-year-olds, somewhat limiting demand. However, this will be offset by the greater moral hazard in the program, because parents won't be required to contribute anything toward their child's care.

At the same time that it will fuel demand, the program — by its very existence — will shrink supply in the private sector.

Unlike Quebec, California's program won't ban new private preschools or bar existing ones from participating. But private preschools that don't participate will be hard-pressed to find parents to pay when competing against fully subsidized schools.

Preschools that do participate will have to pay wages on the K-12 teacher scale negotiated through a mandatory collective bargaining process that the unions lobbied for. They will also face other onerous regulations such as minimum staff-child ratios. All of this will raise the cost of doing business, driving many private day care centers out of the market and leaving fewer affordable options for low-income parents for whom three hours of state-funded day care covers less than half their needs.

Will California's program enhance school readiness of children in its care and improve educational outcomes, one of the main arguments of child care advocates? Not if Quebec's experience is any indication.

Pierre Lefebvre, an economics professor at Universite du Quebec, has just completed a study comparing 4- to 5-year-olds in Quebec with kids elsewhere in Canada and found that Quebec kids have no better scores on the Peabody vocabulary test — the most widely used indicator of school readiness.

California's private day care industry already serves the needs of a majority of parents effectively. In addition, California and San Francisco already offer child care assistance to needy parents through welfare-to-work and myriad other programs. Instead of instituting a huge, new pre-school entitlement, the best way to deal with any remaining need might be to strengthen such programs.

Universal preschool sounds progressive, but actually has pernicious unintended consequences for the parents and children it seeks to help.

Ms. Dalmia is a senior analyst and Ms. Snell the director of education policy at Reason Foundation, a California-based free-market think tank.


Shikha Dalmia is Senior Analyst

Lisa Snell is Director of Education


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