*This report was replaced in its entirety by the Department of Education on November 5, 2018.

The system of public funding for early childhood services is complex and involves multiple divisions of multiple agencies across secretariats. This service system characteristic can be a challenge for the families of very young children, who frequently need a wide range of services including health, social services, care and education (e.g. child care, preK), work supports, and early intervention. Virginia’s early childhood service providers have struggled with the complexity of how to finance quality services for families with young children.

The General Assembly charged the Integrated Early Childhood Fund workgroup with making recommendations on how the state could better organize its early childhood funding, specifically “to examine opportunities including, but not limited to, leveraging existing funds targeted to early childhood development with the goal of identifying strategies and mechanisms for developing an Integrated Early Childhood Fund." The purpose of the Fund is “to more feasibly implement the cohesive and efficient administration of early childhood resources, increasing access to quality early childhood services for at-risk children with little additional fiscal impact on the Commonwealth’s budget."(*1) The workgroup’s recommendations are meant to shed light on financing strategies in Virginia that would allow for more integrated services at the community and provider level.

I. Why Consider Integrated Financing?

Affordable and high-quality early childhood services are essential to Virginia’s workforce – both today’s and the future workforce. Recommendations in Blueprint Virginia 2025, the Virginia Chamber’s economic competitiveness plan for Virginia, call for Virginia’s leaders to create an integrated publicprivate financing model that promotes innovative, flexible, and coordinated approaches to high-quality early childhood services for at-risk children. Moreover, nationally states are being called to action; a February 2018 report from the National Academies of Sciences, Engineering, and Medicine compelled states to take an active role in making early care and education more affordable and easier to access for families.

II. The Current Status of Virginia’s Early Childhood Funding Streams

The federal government – and to a lesser extent the state government – provide funds designed to meet many of the needs of families with young children. All states wrestle with the challenge of fragmentation among funding streams supporting services for young children.

The workgroup recognizes that each of these revenue streams provides opportunities, but there are challenges in connecting different programs like the Virginia Preschool Initiative (VPI), child care subsidy, and early intervention/preschool special education – making it difficult for families to access services in a seamless way, for communities to deliver them in a coordinated way, and for collective goals for child and family success to be achieved overall. VPI is state lottery-funded, so the state has more flexibility in addressing changes in design and delivery. The amount of state flexibility in the administration of federal funding streams varies from program to program, but agencies administering those programs can be cautious about exercising flexibility if they have concerns that it might jeopardize funding.

An important aspect of Virginia’s early childhood system in recent years has been building community-level capacity where local leaders have taken the lead in defining the path forward, demonstrating a willingness to innovate and pilot new approaches. Workgroup members noted deference to these locally-driven efforts, though local leaders voice the desire for state level leadership to facilitate community efforts through consideration of waivers to reduce barriers or expanded support of local pilots to lead the way on finance integration.

III. The Potential for Existing Appropriations

The workgroup considered the specific examples of funding streams identified by the General Assembly as potentially appropriate for consideration in the IECF due to under-utilization - VPI, Temporary Assistance for Needy Families (TANF), and Child and Adult Care Food Program (CACFP). The workgroup determined that they would like to see the focus of changes to these programs on ensuring that they are reformed to realize their full potential to serve children and families. These change strategies are underway: VPI’s reform is in the hands of the Joint Subcommittee on the Virginia Preschool Initiative; TANF’s reform is the task of a special subcommittee of the Commission on Youth; and VECF and the Commissioners of the Departments of Social Services are working together to address increased enrollment in CACFP by Virginia’s early care and education programs.

Other promising revenue streams identified are:

• Mixed Delivery Preschool Grants Program, an initiative that will continue to inform and bolster considerations for the appropriate role and leadership from the state level.

• Child Care and Development Fund expansion, an increase in federal funding that presents a potential opportunity for Virginia to leverage new resources in a redesigned system.

• Several new appropriations dedicated to the Virginia Preschool Initiative approved in the 2018 General Assembly session, creating opportunities for increased quality, accountability, and a slightly increased per pupil expenditure rate for that program.

• Preschool Development Grant, a federal funding opportunity directed at the birth to age five span that could articulate an appropriate role for the state in building capacity for integrating governance, financing, quality improvement, and related data systems development.

IV. Findings and Recommendations

The workgroup believes strongly that the state’s approach to meeting the needs of children and families should be holistic, but struggled to ascertain how the state could best facilitate that process for communities without imposing risk (e.g. violating federal requirements for use of funds and risking their loss) on agencies administering publicly funded programs. Deliberations resulted in these insights:

• A number of initiatives and potential opportunities are in motion at the current time that influence the posture of the workgroup regarding its recommendations.

• Emerging considerations about a potential shift in governance of the early childhood programs in Virginia are an undercurrent to the IECF workgroup deliberations.

• The members highlighted the success of Smart Beginnings and Mixed Delivery Preschool pilots and wondered about how the state could best facilitate the continued insights from those efforts.

Based on these factors, the workgroup determined that the most practical approach in creating an Integrated Early Childhood Fund is to pilot a “consolidated application" for VPI and CCDF funds, which would build on the existing Mixed Delivery concept and give communities the opportunity to plan comprehensively about their early childhood spending - even beyond early care and education. The quality set-aside of the CCDF may be particularly salient for this effort, supporting demonstration of state and local agreement on quality standards across CCDF-funded child care and VPI-funded preschool services. The state could then utilize the outcomes of the consolidated application approach to distill lessons for the creation of a statewide Integrated Early Childhood Fund.

In addition, the workgroup respectfully requests an extension (in order to continue to explore potential integrated early childhood financing strategies) by way of a charge to complete and submit a final report of findings and recommendations by October 15, 2019.

Conclusion

The workgroup’s recommended mechanism for developing an Integrated Early Childhood Fund would honor Virginia’s commitment to community-level capacity, acknowledge the limitations of state agencies in combining funding, and represent a step toward more thoughtful coordination of funds to improve outcomes for children and families. The consolidated application approach would have a near-term impact on communities and potentially a longer-term statewide impact based on lessons learned. This effort can occur in parallel with efforts to resolve underspending in key state programs, with the expectation that all of the funding streams involved will be key building blocks in community spending plans submitted in consolidated applications.

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(*1) H.B. 5002, Item 128, Section I