Early Childhood Systems Building Resource Guide

According to the Urban Institute and Brookings Institution Tax Policy Center, the sources of state general revenue are income, sales, and other taxes; charges and fees; and transfers from the federal government. In 2016, state governments collected more than $1.9 trillion in general revenue. General revenue from income, sales, and other taxes totaled $923 billion—nearly half of all general revenue. About one-third came from intergovernmental transfers.[1]

States often use general revenue funds to match federal funding, as is required for the Child Care and Development Fund, or as a required funding base to draw down federal funds. General revenue may also be used to go beyond required matching or maintenance-of-effort requirements in early childhood. States frequently use general revenue for state-only programs as well, such as state-sponsored preschools.

State general revenue can be allocated to fund any part of the early childhood system. These allocations may be found as separate line items within organizations, such as education, human services, or consolidated early childhood agencies, and they may also be embedded within formulas, such as state education aid formulas.[2]

There are many examples of states using general revenue to support early childhood, including the following:

The National Academies of Sciences, Engineering, and Medicine created a table to show the major sources of federal and state early childhood education funding, adapted below:[4]

Table 1. Major Sources of Federal and State Early Childhood Education Funding in FY 2016

Program: Subsidized CarePopulation
Targeted
Financing
Mechanism
Federal Funding
($ billions)
State and Local Funding
($ billions)
Early Head Start and Head StartFamilies with income < FPL, ages 0–5 yearsDirect to providers$9.168-
Child Care and Development Fund (CCDF)Qualifying low-income families, ages 0–12 yearsTo providers via vouchers or contracts$3.427$1.307
Temporary Assistance to Needy Families (TANF) transfer to CCDFQualifying low-income families, ages 0–12 yearsTo providers via vouchers or contracts$0.792-

TANF direct child care

Qualifying TANF recipients ages 0–12 yearsTo providers via vouchers or contracts$0.782$2.776
State-funded prekindergartenTargeted or universal, ages 3-5To providers via vouchers, scholarships, contracts, grants, or school-funding formulae-$7.391
Locally-funded prekindergartenSame as state-fundedSame as state-funded-Not available
Total$14.169$11.5+

 

Program: Tax-Based SubsidiesPopulation
Targeted
Financing
Mechanism
Federal Funding
($ billions)
State and Local Funding
($ billions)
Child and Dependent Care Tax CreditWorking families with tax-liability, ages 0-12 years (and adults)Personal income tax credit (refundable in some states)$4.590Not available for equivalent state programs
Dependent Care Assitance ProgramWorking families with tax-liability, ages 0-12 years (and adults)Employer-administered account to pay for eligible expenses with pre-tax dollars$1.000-
Employer-provided child care creditWorking families with qualifying employer, ages 0-12 years (and adults)Employer tax credit$0.010Not available for equivalent state programs
Total$5.6Not available

The total Federal Funding($ billions) for Subsidized Care and Tax-Based Subsidies is $17.5-$19.8 and the total State and Local Funding ($ billions) is $11.5+

Adapted from National Academies of Sciences, Engineering, and Medicine. (2018). Transforming the financing of early care and education, p. 62. Washington, DC: The National Academies Press.

 

[1] Urban Institute, & Brookings Institution. (n.d.). The state of state (and local) tax policy [Online briefing book]. Retrieved from https://www.taxpolicycenter.org/briefing-book/what-are-sources-revenue-state-governments.

[2] Mitchell, A., Stoney, L., & Baker, J. (2004). Financing early childhood care and education systems: A standards-based approach. In A. R. Tarlov & M. P. Debbink (Eds.), Investing in Early Childhood Development (pp.189–214). New York, NY: Palgrave Macmillan.

[3] Barnett, W. S., Carolan, M. E., Squires, J. H., Brown, K. C., & Horowitz, M. (2015). The state of preschool 2014. New Brunswick, NJ: National Institute for Early Education Research. Retrieved from http://nieer.org/state-preschool-yearbooks/the-state-of-preschool-2014.

[4] National Academies of Sciences, Engineering, and Medicine. (2018). Transforming the financing of early care and education, p. 62. Washington, DC: The National Academies Press.