Monday, August 1, 2011

Reforming Funding Mechanisms - Emeritus Professor Anne Smith

Anne Smith, Emeritus Professor, Ph.D., FRSNZ, CNZM

I support the majority of the Early Childhood Taskforce Report’s recommendations for improving the quality of Early Childhood Education and increasing access to quality services for children from all SES and cultural backgrounds. I am concerned, however, that the proposed new funding system could have a negative influence on affordability and participation rates in ECE for some groups, particularly middle-income families with 3 to 5-year-old children. I therefore recommend that introducing such a system should wait until the fiscal situation improves, so that all families and children can benefit.

My Background in Early Childhood Education
I am proud to have played a part in making New Zealand a world leader in early childhood policies. I have been involved in research, advocacy, and policy-making in early childhood for almost 40 years, and was delighted by the invitation to join the current Early Childhood Taskforce. This appointment is part of an ongoing process during which various governments, departments and ministries have called on my advice. For many years, I have had personal contacts with ministers and government officials, and participated in a variety of advisory groups, working parties and committees. My career has been devoted to making New Zealand a better place for families and their children, and to advancing children’s well-being, rights and education. It has been rewarding to participate in improving the quality, status and affordability of early childhood education for families, as well as the qualifications, status and working conditions of Early Childhood teachers. My personal investment over the years proves my total commitment to a continuously improving early childhood sector.

Support for Main Body of Report
My goals are to continue to advance New Zealand’s ECE policies, building on the wonderful progress achieved in the last 10 years towards the provision of universal, accessible and affordable high quality early childhood services (ECS) for all young children and their families. Most of the recommendations of the Taskforce Report are compatible with ongoing progress for ECS, because they are based on arguments for investing in quality ECS, and introducing policies for advancing them. The bottom line is that children, families and the country all benefit when children participate in quality EC services. The Taskforce was convinced that there was strong evidence base to show that investing in high
quality ECS is cost-effective, and results in positive long-term outcomes for children and families, and I am completely in agreement with them.

Principle of Universal Accessibility
I am concerned though that the proposed new funding system may have a
negative influence on participation rates in ECE for some groups, most particularly middle-income families. It is clear from research cited in the report that affordability is a key issue affecting participation in ECE, so if affordability declines for some families, then their children are less likely to participate. According to a recent European Commission Report:
There is clear evidence that universal access to quality ECEC is more
beneficial than interventions targeted exclusively at vulnerable groups.
Targeting ECEC poses problems because it is difficult in practice to
identify the target group reliably, it tends to stigmatise its beneficiaries
and can even lead to segregation at later stages of education. Targeted
services are also at more risk of cancellation than universal ones.(1)

US researcher, Steve Barnett, shows large economic gains when all SES groups
participate in quality preschool.(2) Swedish sociologist and economist Gosta Esping-Anderson found evidence that provision of universal quality early childhood education has greatly diminished the gap in income and educational achievement between high and low socioeconomic status children in some European countries, such as Sweden and Denmark. He is opposed to targeting, because of “the high transaction costs and difficulty of identifying need”,(3) recommending instead universal levels of coverage with graduated subsidies, consistent with New Zealand’s current Twenty Hours policy and Work and Income subsidies.

Concerns about Losers in New Funding Scheme
During the deliberations of the Early Childhood Taskforce modelling of some possible funding scenarios was carried out, based on retaining fiscal neutrality.
This modelling showed that whereas some families would benefit (notably families with 2 year-olds), others, mainly middle-income families with 3 to 5 year-olds, were likely to lose funding and be unable to make up the shortfall. Essay 3 suggests that the system will be fairer and simpler than the old system, but this is arguable. Although the essay states that it will “retain universal subsidy for at least 20 hours of subsidy per week” (p. 76), it is likely that the level of that subsidy would decline markedly for parents currently receiving the 20 hours subsidy for their 3 and 4 year-olds in Early Childhood centres. While there are problems with the current funding system, it is not clear that the proposed system is simpler or fairer. It is inevitable that a fiscally neutral scenario will mean the end of the current 20 hours policy. The Taskforce proposal does not indicate that ECS for 3 to 5 year-olds will be substantially subsidised, and it certainly moves right away from free or very affordable. There is clear evidence from recent research (4) that the 20 hours policy increased affordability of ECS, with 80% of parents saying that EC was  affordable in 2009, compared to 66% in 2004. As one parent said:
It makes it worthwhile for me to work, which in turn makes me a FAR better mother. BEST thing that has ever happened to our family. The 20 free hours also helped us to decide to have a second child. (5)
The submissions to the ECT show widespread concern over the effects of the
funding cuts that took place in 2009/2010. Further funding cuts are likely to produce significant hardship for families, and decrease the viability of services.
I cannot support recommendations that are likely to further exacerbate an already difficult situation.
Since the ECT was constrained to produce outcomes that were fiscally neutral,
it was impossible to design a new funding system that retained current levels of
funding for 3 to 5 year-olds. If the funding policy included increased investment and ‘no losers’, then it could have benefits for all. Given that New Zealand spends less than half of the OECD average on early childhood and is 25th out of the 29 OECD countries in investment in the early years (6), increased investment is highly desirable. Should that increased investment become possible in an improved fiscal situation, the new funding system would become, in my opinion, much more advantageous and viable. Since it is unlikely that this improvement will take place in the near future, I suggest that the current funding regime should remain in place in the meantime.

Concerns about Identifying Children for Targeted Funding
The argument is that the new funding system will be better for low SES and
Māori and Pasifika families, but there is little information about how the new
scheme will be able to accurately seek out and identify targeted groups. It is
already possible for children from disadvantaged groups to attend ECS free (or
at very low costs) with the current subsidies. The Taskforce was informed that a
substantial number of eligible families do not access these subsidies. The solution surely is to assist families from low-income groups to access the Work and Income subsidy, because it guarantees that families will be the recipients, and that funding will not be absorbed by administrative costs (such as the costs of screening). Other recommendations in our report (in Essay 4: Achieving Access for All Children) suggesting the development of ECS as hubs that reach out into local communities, are much more likely to be successful in increasing the participation of those groups, in my opinion.

The mechanics and compliance costs of centres screening potential enrolments
to establish their ethnicity, disability and income, are quite unclear. The new funding approach will mean that centres will have to determine whether parents fit into ‘priority’ categories, a bureaucratic function previously fulfilled (and funded) by Work and Income. Work and Income involvement minimises any risk of the family relationship with the ECS being soured. ECS asking for private family information and possibly having to decline a reduction in fees could create new barriers for families wishing to enrol. ECS should have a different relationship with parents – warm and trusting - and if they have to become gatekeepers by screening parents, that trust could be undermined.

The current system actually works. In my view, its problems could be fixed with incremental changes. It is both risky and expensive to introduce an entirely new funding scheme, without any obvious widespread advantage to parents and children. Also, and just as clearly, it seriously disadvantages some families, which is unjust and inequitable. The proposed funding system may have advantages for the government and possibly for employers, but I do not see any evidence that it has of benefits for the majority of parents and children.

(1) European Commission (2011). Early childhood education and care: providing all our children with the best start
(2) Barnett, S. cited by Calman, C. & Tarr-Whelan, L. (2005). Early childhood education for all: A Wise Investment. New York: MIT Legal Momentum  Conference,, p.19.
(3) Esping-Andersen, G. (2008). Childhood investments and skill formation. International tax public finance,15, 19-44, p. 41.
(4) Mitchell, L, Meagher-Lundberg, P., Mara, D., Cubey, P. & Whitford, M. (2011). Education and Care Parent, Totara, Locality-based evaluation of pathways to the future. Nga Huarahi Arataki, Integrated Report 2004,2006 and 2009. Report prepared for Ministry of Education.
(5) Mitchell, L, et al., (2011). p. 50
(6) OECD (2009). Doing Better for Children. Paris: OECD.

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