A growing body of evidence shows that quality preschooling is associated with a host of benefits to students, schools, and society at large. These benefits can have a positive impact on a state’s budget, too: Children who attend preschool are not only more successful throughout their school careers, they also graduate and go on to college more often, commit fewer crimes, and earn higher wages once they enter the workforce. Research suggests that making public pre-schooling available to all children would be a cost-effective way to improve academic performance. This Commentary explains why making public preschooling available to all children in the state would be a wise investment for Ohio.Education - Ohio

Clive R. Belfield

English

Research Papers in Economics

When children go on to kindergarten and
higher grades, those who have had ECE
repeat grades less often and need less
special education assistance. Both of
these reductions translate into cost sav-
ings for schools. Children who have had
ECE also commit fewer crimes than
children in the same socioeconomic cir-
cumstances who have not had ECE. The
resulting cost savings may be significant,
given the high expense incurred for each
crime and the strong impact ECE pro-
grams have been shown to have on crim-
inal activity. 
Schools will reap cost savings from the
less direct effects of ECE, too. Annually,
total education spending on K–12 
schooling in Ohio is over $12 billion
(Ohio Office of Budget and Management,
February 15, 2005
Federal Reserve Bank of Cleveland
Should Ohio Invest in Universal Preschooling?
by Clive R. Belfield
ISSN 0428-1276
A growing body of evidence shows
that quality preschooling is associated
with a host of benefits to students,
schools, and society at large. These
benefits can have a positive impact on
a state’s budget, too: Children who
attend preschool are not only more
successful throughout their school
careers, they also graduate and go on
to college more often, commit fewer
crimes, and earn higher wages once
they enter the workforce. Research
suggests that making public pre-
schooling available to all children
would be a cost-effective way to
improve academic performance. This
Commentary explains why making
public preschooling available to all
children in the state would be a wise
investment for Ohio.
Ohio has almost 150,000 three-year-
old children; however, fewer than 41,000
are covered by publicly supported
preschool programs, and the majority of
these are in special education or Head
Start programs. Preschooling is associ-
ated with a number of positive outcomes,
from higher test scores, graduation rates,
and college progression to reductions in
special education, grade repetition, and
crime. One might wonder why it isn’t
made available to every child. 
At issue is whether the benefits would
outweigh the costs of providing
preschool programs to a larger propor-
tion of children. Currently two states,
Georgia and Oklahoma, offer universal
preschooling, but many others are con-
sidering expanding their coverage.
Should Ohio make publicly funded
preschool programs available to all chil-
dren across the state?
■ The Economics of 
Preschooling
Economists think of education as an
investment that enhances children’s
prospects and yields economic payoffs
for society (see Carneiro and Heckman,
2003). Early childhood education (ECE)
is no exception to this rule. In fact, most
recent research finds that investing early
is a very powerful investment and that
what hinders children from learning in
school (and going on to college) is the
lack of adequate preparation at an 
earlier age.
But would an investment in universal
ECE make economic sense for Ohio? To
answer that question, the investment
should be viewed within a balance sheet
framework, relating the costs of provid-
ing the investment to its anticipated
future benefits. 
On one side of the balance sheet is the
cost of providing ECE programs. The
cost ingredients include facilities, materi-
als, and salaries for administrative direc-
tors, teachers, and assistants. The actual
costs could vary considerably, depending
on how the programs are designed and
the supplemental services provided.
High-quality programs cost more to pro-
vide. Class sizes are smaller, and teachers
are more likely to be certified and experi-
enced. Meals are provided, and children
are screened for health and learning prob-
lems. One of the most successful ECE
programs, the High/Scope Perry
Preschool program, cost approximately
$7,000 per child annually. For the sake 
of comparison, Head Start programs in
Ohio average $5,500 per child, and K–12
education costs an average of $8,441 per
child per year.
On the other side of the balance sheet are
the benefits of wider ECE participation.
These are numerous. Some benefits
accrue in the short term, while the child
is enrolled and immediately after leaving
a program. Some accrue in the medium
term, as the child progresses through
school. Some accrue over the longer
term and through adulthood, with entry
into the labor force. 
The short-term benefits are obtained pri-
marily by the children who participate
and include the obvious—improved 
academic achievement—but also higher-
quality health (because they receive
immunizations and early diagnosis of
treatable conditions) and better nutrition.
Children enrolled in ECE are also less
likely to suffer neglect or abuse. State
and federal governments may also bene-
fit at this stage, because some parents
will be able to enter the workforce and
generate tax revenue while their children
attend preschool.2004). Any improvement in the profi-
ciency of a cohort of children entering
school may yield cost savings, and
expanding ECE programs will generate
such improvements in proficiency. 
Academic advantages for children who
participate in ECE programs are well-
established, but in a generalized program
there will be spillover impacts for other
students as well. These spillovers come
through peer effects: More able students
enhance the learning of their classmates
by not disrupting class discussions, for
example, or by influencing their aspira-
tions and values. These effects are also
well-established. A second source of
learning productivity gains are the more
general behavioral advantages that arise
when students are better prepared for
school. Good student behavior relieves
pressure on school resources, both for
teaching (teacher turnover is reduced and
fewer substitutes are needed, for exam-
ple) and the noninstructional aspects of
education (fewer disciplinary, security,
and custodial services are required).
These productivity gains, and the cost
savings associated with them, will accrue
where participation in ECE programs is
more widespread. 
Over the long term, gains from ECE are
realized as the children enter the labor
force themselves, earn higher salaries,
and contribute larger tax payments. 
These benefits have been established in a
number of high-quality, peer-reviewed
research studies, although not every ben-
efit was obtained in each study (see table
1 and Gilliam and Zigler, 2000, in the
recommended reading for details for
individual ECE programs). High-quality
programs, such as the High/Scope Perry
Preschool program, the Abecedarian
Early Childhood Intervention project,
and the Chicago Child-Parent Center and
Expansion program, have shown the
strongest effects, clearly demonstrating
that they improve outcomes in early
childhood and have long-lasting impacts.
Prior economic analyses have found that
the public benefits easily outweigh the
costs. However, these analyses have
been small scale and focused mainly on
targeted programs for at-risk children.
These are children for whom preschool
programs might be expected to have the
highest payoff. (They are at the highest
risk of being involved in crime and rely-
ing on welfare). What is needed is infor-
mation on what would happen if oppor-
tunities were expanded for all children,
taking into account Ohio’s labor market,
school system, and crime rates.
n  Economic Benefits for Ohio
What kind of economic benefits could
Ohio expect to gain if it decided to
expand its publicly funded early child-
hood education programs to more chil-
dren? It is possible to answer that ques-
tion by simulating the economic
consequences of the proposed expan-
sion. (This simulation is detailed in full
in Belfield, 2004.) 
We simulate the consequences of
expanding public preschooling to those
who receive no public provision
presently. To simplify the analysis, we
calculate the effects of making this
change for a single cohort of three-year-
olds—coverage would be available to all
Ohio children aged three in 2004 and
would extend for the two years before
they enter kindergarten.While the pro-
gram would be offered to all three-year-
olds, we assume only an additional 40
percent will choose to enroll. We base
this on the take-up rates that have been
observed in states that offer universal
provision. In Ohio, this policy would
mean that an extra 43,000 three-year-
olds would attend public preschooling
(from the initial base of 5,000 children).
We also assume that the preschooling
offered would be of a quality sufficient
to generate the outcomes identified in
prior research. Specifically, it would
need to meet a standard defined by the
rating it achieves on the revised Early
Childhood Environment Rating Scale.
We assume a rating of at least 5, which
corresponds to programs such as the
High/Scope Perry Preschool program, a
highly successful program. 
What would this investment cost?
Assuming per-child, per-year expendi-
tures of $5,900, the expanded program
would cost $482 million over the two
years the child is aged three and four.
This is a generous amount (above what
is currently spent per child on Head
Start); it compares reasonably well with
amounts spent in Ohio public schools on
K–12 education; and over two years it
comes close to the resource commitment
for exemplary programs (which are often
shorter durations). Importantly, it should
guarantee beneficial outcomes for partic-
ipants and for the state. 
The economic benefits of this investment
in ECE can be estimated using state-
level data from the Ohio Children’s 
Budget, evidence from large-scale
national datasets, and the results from
field trials. Only the economic benefits
that accrue to society are estimated,
leaving out those that accrue to individ-
ual students and their families. Each
benefit is calculated using conservative
assumptions. We also calculate these
benefits in terms of their present value,
that is, we take into account the fact that
benefits that accrue years after the
investment are worth less now. 
The results of the simulation show that
Ohio would gain across four domains
from investing in universal preschooling. 
Educational Cost Savings. School sys-
tems will save primarily because they
will be able to reduce both special edu-
cation expenditures (fewer children will
need it) and the total cost of educating
each child to graduation (fewer children
will repeat a grade). Schools could also
save on overall spending and achieve the
same outcomes as before (because stu-
dents will be more proficient learners
and less disruptive). To appreciate why
these factors should make such a differ-
ence, consider the costs of special edu-
cation and grade repetition. In fiscal
year 2003, the average per-pupil spend-
ing for each year of regular education
was $8,441. Per-pupil spending on each
year of special education was propor-
tionately higher, $16,038. Children three
years old in 2004, depending on which
track they follow over the course of their
K–12 education, will receive present
value expenditures over the next 12
years of $69,199 if they do not repeat a
grade or receive special educational ser-
vices, $135,491 if they receive special
educational services, or $74,097 if they
do repeat a grade but do not receive 
special educational services. Assuming
the impacts of preschool are only one-
quarter as strong as those found in pub-
lished studies, the overall saving to the
school system would be $242 million.
Higher Tax Revenues. Tax revenues will
increase immediately because parents
will be able to work while their children
are in preschool and also later, because
children who had ECE will work and
earn more than they would have other-
wise. Using models of expected earnings
from the census and average tax rates,
ECE as proposed here would generate an
additional $19 million in parental tax
contributions and $120 million in addi-
tional taxes paid by the participants as
they grow up and enter the labor force. Lower Expenditures by the Criminal
Justice System. Perhaps the largest
effect of prekindergarten programs is on
crime: Participants in ECE programs
report lower rates of juvenile crime,
adult crime, and less time spent on pro-
bation or in prison, all of which reduce
the pressure on criminal justice system
budgets. Three separate methods are
used to calculate the effect of having
43,000 more children progress through
prekindergarten; taking the average of
these three methods, savings to the
criminal justice system would amount
to $375 million. 
Lower Health and Welfare Expendi-
tures. Preschooling has been found to
reduce the prevalence of risk factors asso-
ciated with problem health conditions;
there are also health gains associated with
screening, immunization, and nutrition.
Other studies find very strong impacts on
indicators of child welfare, such as court
petitions of child maltreatment. In its
Children’s Budget, Ohio commits
resources for extensive services that
address the health and welfare needs of
children. With wider participation in
ECE, these resources can be reduced, as
children who have had ECE are less
likely to require the state’s welfare pro-
grams and health support services. On
very conservative assumptions, expand-
ing ECE programs would save around
$25 million on these services. 
n  The Net Returns from
Investing in Universal 
Preschooling
Table 2 brings the costs and benefits
together. The costs of $482 million are
easily offset by the total cost savings
from expanding early childhood educa-
tion of $782 million. The net savings are
$299 million. This yields a benefit–cost
ratio of 1.62, which means that for every
$1 invested, returns to the state are
$1.62. This strongly suggests that the
opportunity of universal preschooling
for all three- and four-year-olds is worth
the investment for the state of Ohio,
without accounting for the benefits to
the children and their families. 
This result is based on an economic
model. Inevitably, such models are only
as good as their assumptions, in this case
about the impacts of early childhood
programs and their economic conse-
quences. Given the high quality of the
research evidence and the availability 
of new data, it is possible to substantiate
many of the assumptions about impacts.
For costs data, state-specific information
is applied. (Although budgetary infor-
mation is far from perfect, Ohio’s Chil-
dren’s Budget is particularly compre-
hensive in detailing the investments
made in children.) Most importantly, a
highly cautious set of assumptions is
applied. Sensitivity analysis—varying
the required investment and the cost sav-
ings—shows that there are no plausible
scenarios in which the costs exceed the
benefits. The overall conclusion is there-
fore robust to alternative assumptions. 
n  Summary
Should Ohio offer all children the
opportunity to attend high-quality
preschool for two years before they
enter kindergarten? The analysis we
conducted here is aimed at answering a
simple question, namely, whether there
TABLE 1 BENEFITS/COST SAVINGS FROM EARLY CHILDHOOD 
EDUCATION PROGRAMS 
n Enhanced academic achievement
n Improved health and nutrition
n Increased well-being and less abuse
Short term
n Higher tax revenue from parents’free
time
Medium term
n Greater school system efficiency
(through reduction in special education
and grade repetition, higher learning 
productivity, and reduced pressure on
school resources)
n Reduced abuse and neglect
n Lower reliance on public health care
Long term
n Higher likelihood of graduation and
college enrollment
n Higher probability of higher wages 
and employment
n Lower teen pregnancy and 
delinquency
n Increased income tax revenues
n Lower welfare dependence
n Reduced delinquency and crime
n Reduced educational subsidies for 
college
For the child (and family) For society and the economy
TABLE 2 ECONOMIC IMPACT ANALYSIS OF EXPANDED EARLY 
CHILDHOOD EDUCATION (ECE) PROGRAMS IN OHIO 
Cohort entering kindergarten
in 2006 with expanded ECE
Present value ($ million) provision from 2004–06
Pre-K ECE investment cost $482.40
Savings
School system cost savings $241.89
Tax revenues from earnings $139.52
Criminal justice system cost savings $375.41
Health and welfare cost savings $ 24.76
Total fiscal benefits $781.58
Net fiscal cost savings $299.19
Benefit–cost ratio 1.62
NOTE: Present value figures are discounted over the child’s educational span, from K–12, at a discount
rate of 5 percent. Economic values are in 2003 dollars.Federal Reserve Bank of Cleveland
Research Department
P.O. Box 6387
Cleveland, OH 44101
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credited. Please send copies of reprinted
material to the editor.
Clive R. Belfield is an assistant professor in
the Department of Economics at Queens
College, City University of New York.
The views expressed here are those of the
author and not necessarily those of the Federal
Reserve Bank of Cleveland, the Board of 
Governors of the Federal Reserve System, or
its staff. 
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is compelling economic evidence in
favor of expanding early childhood edu-
cation programs in Ohio. On the evi-
dence we have seen, there is likely to be
a very strong economic payoff. 
The proposed policy is significant and
ambitious, but not infeasible. Certainly,
we should not expect universal pro-
grams to generate the level of economic
returns that have been found in acade-
mic studies: These are based on small-
scale programs targeted to at-risk 
populations. Expanded programs will
generate smaller impacts per child. Nev-
ertheless, based on the economic evi-
dence currently available, and applying
that evidence to Ohio, the case for pub-
lic investments in universal preschool-
ing is strong. 
n  Recommended Reading 
Clive R. Belfield. 2004. “Investing in
Early Childhood Education in Ohio: An
Economic Appraisal.” Center for Ameri-
can Progress, Working Paper. Available
at <www.americanprogress.org/atf/cf/
{E9245FE4-9A2B-43C7-A521-
5D6FF2E06E03}/belfield_report.pdf>.
Pedro Carneiro and James J. Heckman.
2003. “Human Capital Policy.” In
Inequality in America: What Role for
Human Capital Policies? edited by
James J. Heckman and Alan B. Krueger.
Cambridge, Mass.: MIT Press. 
Walter S. Gilliam and Edward F. Zigler.
2000. “A Critical Meta-analysis of All
Evaluations of State-Funded Preschool
from 1977 to 1998: Implications for
Policy, Service Delivery, and Program
Evaluation.” Early Childhood Research
Quarterly, 15: 441–73.
Ohio Office of Budget and Manage-
ment. 2004. Executive Budget for 
Fiscal Year 2006 and 2007, Tab E,
“Agency Budget Recommendations.”
<www.omb.ohio.gov.budget/execu-
tive/0607/bb0607_e.pdf>.
Ohio Office of Budget and Management.
2004. The Ohio Children’s Budget.
<www.obm.ohio.gov/Information/bud-
get/bluebook0405/tab_d/child.asp>.

Should Ohio invest in universal preschooling?

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Should Ohio invest in universal preschooling?

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