New Report Examines Financial Barriers to Delivering High-Quality Early Education in Philadelphia

PHILADELPHIA — July 27, 2015 — High-quality early care and education (ECE) programs have been proven to create positive outcomes for children—especially among those living in poverty. Yet many children from low-income families have a hard time accessing high-quality child care and miss the critical developmental growth and foundation needed for academic and life success. Today, Nonprofit Finance Fund (NFF) released a new report that examines the financial challenges program providers face, and offers recommendations about actions to increase access to quality care.

The report, Overcoming Financial Barriers to Expanding High-Quality Early Care & Education in Southeastern Pennsylvania, is based on NFF's work with more than 147 nonprofit child care centers in Southeastern Pennsylvania. The William Penn Foundation funded the study and will host a convening tomorrow with policymakers and early education stakeholders in Philadelphia to discuss NFF’s findings and the implications for child care providers, children and families.

“Despite proven, long-term benefits to children, there are still many financial barriers to operating quality programs and giving more children a stronger start in life,” said Elliot Weinbaum, Program Director at the William Penn Foundation. “As our city, state, and nation seek to expand access to high quality early childhood education, it is essential that we understand the financial and other barriers that currently impede our progress, and how those barriers might be ameliorated in order to create an equitable system in which all of our young learners have access to quality education.”

Key findings of the report include:

• Early care and education programs operate very close to the financial edge with little margin for error. Regardless of the quality of care, most providers operate very close to the break-even point (operating margins equal to 1% of expenses) and have limited cash reserves to weather the inherent volatility of the child care business.

• The decision to provide high-quality programs creates more financial and programmatic demands, without the promise of a commensurate increase in financial revenue. There are significant barriers to operating high-quality programs (that result in positive life outcomes for young children), such as greater costs for more credentialed, experienced teachers and costs associated with participating in quality rating programs.

• Existing revenue sources do not allow high-quality programs (particularly those serving low-income children) to address the relatively high fixed costs of care. Based on its work in Pennsylvania, NFF calculated an average local cost of care of $11,832 per child per year—with the cost per child substantially greater for high-quality providers. Despite Pennsylvania's progressive approach to increasing reimbursements for high-quality providers, the maximum per-child reimbursement is $9,789 per year. Providers struggle to close this gap and to account for essential expenditures such as investments in facilities and contributions to reserves.

The report includes: additional findings related to the financial barriers of high-quality care and education; specific short- and long-term recommendations for policymakers, funders and program operators aimed at overcoming current challenges and improving access; and early care and education myths and rebuttals.

"Our children come first, and we do everything in our power to send them off into the world as prepared, eager learners who understand how to succeed in school and with their peers," said Mary Graham, Executive Director of top-rated Children's Village child education center in Philadelphia. "Our financial constraints are considerable. This report helps all stakeholders understand the true costs of care, and concrete approaches to expanding access to quality care."

Pennsylvania is among several states making investments in early childhood education in an effort to better prepare children for long-term success, and to reduce future costs associated with persistent poverty.

"Addressing entrenched poverty requires cross-sector collaboration and investment in things that we know work to reduce long-term social costs," said Kristine Alvarez, Associate Director of Nonprofit Finance Fund and lead author of the report. "Quality early care and education provides tremendous return on investment and untold value to children in these programs. Providers need more support in order to expand access to quality care in low-income communities."

William Penn Foundation hosted a presentation and panel discussion on July 28, 2015 to explore findings and highlights from the report. Highlights from this discussion were organized into a four-part video series about early childhood education called Quality Talks. Click here to view.

Findings from this report have also been featured in a TV interview on NBC, on Philadelphia’s local NPR Station WHYY, in a blog on Education Week and in Philadelphia City Paper.