Almost two-thirds of California families currently choose to send their 4-year-olds to preschool. Of those who do, almost half choose a preschool program operated by the state of California, while the other half choose a privately operated preschool. If Proposition 82, an initiative on the June ballot, is implemented those figures will radically change. Most family- and other privatelyowned preschools will vanish, replaced by government-run, taxpayer-funded preschools.
Proposition 82 would entrench a $2.3 billion per year government-run universal preschool program into state law. The Proposition 82 effort was launched on the heels of the RAND Corporation’s March 2005 study, The Economics of Investing in Universal Preschool Education in California. The RAND study paints an extremely optimistic and rosy picture about how government-run preschools would benefit society, concluding that they would generate “between $2 and $4 in benefits for every dollar expended.”
This report assesses RAND Corporation’s cost benefit analysis and finds that it significantly overestimates the upsides and drastically underestimates the downsides of universal preschool and the California proposal. Using RAND's own data and alternative assumptions based on the studies they reference, it is easy to demonstrate that universal preschool generates losses of 25 to 30 cents for every dollar spent. And these losses are calculated before including any of the additional universal preschool program costs that RAND ignored in its analysis.
Proposition 82, even according to RAND Corporation’s low estimates, would cost California taxpayers $2.3 billion each year in perpetuity.2 With those annual operating expenses, only the brightest—and unlikeliest—scenarios would produce benefits that outweigh the costs of universal preschool. In its analysis, the RAND study ignores numerous costs that will add billions to the preschool bill for California taxpayers and will thus make RAND’s predictions even more improbable.
Where today’s non-government preschools, many of them family-owned and operated, constitute 45 percent of the market, the RAND study predicts that most private providers will disappear if the government assumes responsibility for preschool. The vast variety of preschools found in communities across the state would be replaced by a monolithic, one-size-fits-all system designed, controlled, and funded by a statewide bureaucracy—the same bureaucracy that already fails students at the K-12 level. The options available in the private preschool market would wither, with almost 90 percent of children going to state-operated facilities and 10 percent going to private schools, mostly catering to the elite.
Given the California government’s track record in running a universal K-12 education system— with struggling performance, low standardized test scores, a shortage of qualified teachers, and high administrative costs, just to name a few of the current problems—there seems to be little reason to expect the state would achieve a new and unprecedented level of success at creating and providing high-performing preschools for all students across California. How often is it true that the best way to fix a troubled system is to expand it? As it stands, California’s current government-run preschools meet only four out of ten quality standards for preschools.
This is especially true in inner-city schools, populated by low-income families, where the state government has consistently failed to provide a quality education. Advocates of California’s proposal tout government-run universal preschool as a benefit for these low-income, high-risk children. In reality, only about 8 percent of Proposition 82’s funding would go to these families. As the RAND study makes clear, the vast majority of taxpayers’ money would be spent on middle- and high-income families who are already paying for private preschool for their children.
In the public policy debate, many of the justifications for the proposed preschool program rest on conclusions from the RAND study, so before voters unwittingly accept its policy prescriptions, we should investigate the soundness of the analysis.
On its surface the RAND study appears thoroughly researched. However, close inspection reveals the study is deeply and fatally flawed. The assumptions underlying universal preschool’s alleged benefits are unwarranted at times, leading to gross inflation of the benefits. And even more troubling, most of the downsides of the California proposal are completely ignored. To this end, the RAND study devotes more than 80 percent of its pages to estimating tangible and intangible gains to various parts of society, while it devotes less than 5 percent of its pages to addressing the costs. The flaws in the RAND cost benefit analysis of government-run universal preschool are numerous and those addressed in this analysis include:
- The RAND study unreliably conjectures benefits based on small-scale studies that are unlikely to scale statewide;
- RAND questionably assumes benefits will double for children already in government preschool programs;
- RAND questionably assumes that government preschools will provide additional benefits for children already in high quality private preschool programs;
- RAND questionably estimates costs of universal government preschool based on an unseen “forthcoming” study, leaving evaluators with little ability to evaluate their underlying figures;
- RAND completely ignores the cost of creating a whole new government bureaucracy;
- RAND all but ignores intangible and difficult to measure costs of the proposed program;
- RAND underestimates the economic consequences of further increasing taxes in California;
- RAND underestimates the costs of the program by ignoring the already existing teacher shortage and failing to consider the necessary industry-wide changes in teacher wages that would accompany the program;
- RAND ignores countervailing evidence from alternative studies that bring into serious question many of their conclusions.
The RAND study fails to pass the benchmark of what can be considered a reasonable economic analysis. If the RAND study was submitted in our San Jose State University classrooms, it would get an “F”. The bottom line is: The RAND study significantly overestimates the benefits of government-provided universal preschool and significantly underestimates the program’s costs. As a result, the study’s conclusions about the benefits of universal preschool are blatantly overstated and incorrect.