Would each dollar of pre-K spending in Philadelphia generate $1.79 in local economic impact?

Universal pre-K is one of Mayor Jim Kenney’s top priorities the next four years. He hopes to expand kindergarten to 10,000 more children by 2020, calling it the most important investment Philadelphia can make to change schools’ academic outcomes.

To help convince business leaders they can benefit from pre-K as well, he made this claim during a speech given to the Greater Philadelphia Chamber of Commerce: "An economic impact study found that for every $1 invested in pre-K in Pennsylvania, a total of $1.79 is generated in total spending within the state."    

Kenney has used the statistic before, and David L. Cohen, senior executive vice president of Comcast, also cited it in a recent editorial. Is it legitimate?   

Kenney’s communications director, Lauren Hitt, said Kenney got the statistic from the Economy League, which used a study from ReadyNation/America’s Edge, an organization with a goal of strengthening business "through better policies for children and youth." Cohen specifically mentioned the same study in his editorial.

The study examines the total dollar effect of $1 in pre-K spending on the state’s output. Using a tool called the IMPLAN model, it theorizes that the money spent on pre-kindergarten would lead to new learning centers and new teachers and staff. Those new learning centers would spend locally on supplies and other resources for the pre-K programs, and the teachers would spend the money on food, clothes, restaurants and whatever else they’d need. The businesses would in turn hire more people to meet the increased demand. The estimated economic effect would be an additional 79 cents generated in the economy per dollar spent on pre-k for a total of $1.79.

Tim Bartik, author of "Investing in Kids: Early Childhood Programs and Local Economic Development" said the study’s estimate of an additional 79 cents generated per dollar of spending is probably high because it doesn’t take possible tax increases into account, which is the way many early childhood education programs are financed. Kenney hopes to fund the annual $60 million to fund pre-K through a soda tax. Bartik said the likely effect of $1 on pre-K spending, given a tax increase, would be the dollar spent for pre-K and perhaps a little extra.

"I could imagine it being greater than a dollar," said Bartik, who is also a senior economist for the Upjohn Institute and has received a research grant from ReadyNation. "How much greater I couldn’t say. It would be a lot of work to get the right answer."  

He said the estimated impact of an extra 79 cents for every dollar spent was not likely unless the pre-kindergarten program was privately financed.

Steve Doster, the Pennsylvania director for ReadyNation/America’s Edge, confirmed the study did not take into account how each $1 spent on pre-K would be raised, such as through an increase of taxes.  

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"When this report was generated it was generated looking at significant public investment from Pennsylvania," Doster said.

This doesn’t mean expanded pre-K couldn’t have major benefits. In fact, Bartik said the total economic impact from $1 of pre-K spending could be as much as $3 to $5. But that estimate would include benefits from freeing the time of parents of pre-kindergarten students who could work more hours or gain more skills, the possibility of increased earnings of pre-kindergarten students years down the line and the spillover effects from both of those scenarios. The study being referenced by Kenney and Cohen -- and that would be of most interest to the business community -- is about the short run, the total dollar impact of one dollar spent on pre-kindergarten on the state output.   

Ron Haskins said there hasn’t been much other research to back the estimates laid out in the ReadyNation/America’s Edge study but reaffirmed what Bartik and several other studies have pointed out in terms of overall economic benefits. No matter what kind of positive economic effect is being predicted, the total would depend on the unknown: the quality of the program. For pre-kindergarten to pay off for businesses or children, it must provide a good education across the board.  

"I want to emphasize," Haskins said. "Without quality, forget the 79 cents."

Our ruling

Mayor Jim Kenney cited a study saying every dollar spent on pre-k education in Pennsylvania would yield $1.79 for the state economy. Comcast’s David L. Cohen noted the same study in an editorial.  

While studies and experts agree the economic impact of quality pre-kindergarten programs could be substantial, the study pointed out by Kenney is about shorter-term effects on the state’s output. Taxes required to pay for the pre-K program could lessen the economic effect, adding up to less than an extra 79 cents per dollar spent.  

But research and expert opinion illustrate quality pre-K likely will have a substantial, positive effect on the local economy.  

We rule the claim Half True.