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The implication is this: Given the scope of the aims and the scope of the obstacles, success required that ECI have a clear sense of market realities in early care and education, a well-designed theory of action, an effective strategy for inducing a commitment of public funding, and a coherent organizational structure. Chapter Two examines how well ECI met its goals. Chapter Three addresses structural and organizational issues, and Chapter Four discusses how ECI was transformed by the demands of particular stakeholders. Chapter Five describes the factors that contributed to higher-than-expected costs per child, and Chapter Six examines ECI's effort to achieve long-term sustainability.

Finally, Chapter Seven draws lessons from these discussions and offers possible implications for public policy. More specifically, the report states that ECI children demonstrated effective social and behavioral skills and that they went on to succeed in kindergarten and first grade, as measured by low rates of grade retention and referral to special education. Even accounting for this difference, however, ECI at its peak was providing only about half as many child-hours of service as the original business plan had intended for that point in time.

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Even if ECI had been able to scale up more quickly, it could not have served 7, children, because costs per child were substantially higher than expected. As we discuss in depth throughout this report, the business plan made a number of mistakes that contributed to the underestimation of costs. Here we mention three reasons that were prominent.

First, ECI provided far more hours of service per child than the plan anticipated, because virtually all children were served in full-day programs. Second, the plan assumed that operational cost per child was the same at all levels of enrollment, failing to recognize that cost per child is inevitably substantially higher for providers that are less than percent enrolled. Details on the methodology and assumptions for calculating costs are provided in the Appendix to the main report, Gill et al.

See Lynn A. Karoly, Peter W. Greenwood, Susan S.

Rebecca Kilburn, C. The Bottom Line 7 structure both centrally and at the neighborhood level, and it was unduly optimistic about the administrative costs associated with this structure. Devolution of authority to the neighborhood level succeeded in a few neighborhoods where local leaders eagerly joined the ECI process and established plans that led to a strong working relationship with ECI management ECIM and, ultimately, the creation of new, high-quality ECE programs operated by neighborhoodbased agencies.

Moreover, community leaders in a number of neighborhoods affected by ECI joined together to establish an ongoing support and advocacy network for early childhood and school readiness issues. But disappointment is widespread in many of the neighborhoods that were targeted by ECI. Some local leaders felt that ECI did not live up to its promise of permitting neighborhoods to define their needs and the ECE services they wanted.

This left substantial resentment in some neighborhoods, especially those that did not get an early start in the process and were eventually cut off when ECI was scaled down in An effort to change the initiative to make better use of existing state funding streams was only partly successful, and it led to a power struggle over the direction of ECI, as well as to frustration and resentment in the neighborhoods. The sustainability of the two remaining neighborhood agencies sup- 8 A "Noble Bet" in Early Care and Education: Executive Summary ported by ECI has not yet been demonstrated and will be a major goal for these agencies over the next three years while their foundation funding continues.

ECI helped to build the capacity of a number of low-income neighborhoods to provide ECE services that are apparently of high quality. It succeeded in helping several Head Start providers become licensed to provide full-day services. It increased public awareness of the importance of quality in Pittsburgh and around the state and reportedly motivated quality improvements in some major nonparticipating child-care centers in Allegheny County. And it demonstrated the ability of the Pittsburgh community to mobilize large-scale support and funding from diverse constituencies and people with differing political perspectives.

According to the theory of action developed by the original planners depicted in Figure 3. Each lead agency would in turn fund and supervise the participating ECE providers, which would serve children and their families. This theory of action proved to be cumbersome and problematic.

This put several layers of organization between the funders and the primary intended beneficiaries i. The theory of action simultaneously imposed substantial top-down requirements and created additional structures in each neighborhood, making high administrative costs inevitable. Devolution of authority to the community level requires a tradeoff: Neighborhood-led programs may be more Structural Challenges 11 robust and effective than those imposed from the outside, but implementation is not likely to proceed quickly. Although neighborhood agencies endorsed the principle of high-quality service provision, some chafed under a quality monitoring process that they perceived as excessively rigid.

ECI lacked an independent board with the authority to resolve conflicts and make key decisions. ECIM reported to several different UW managers at different points in time, often lacking a clear chain of command. A proliferation of volunteer oversight committees further confused administration and diffused authority. And when key staff departed, individuals who had been hired to serve a specific role were given responsibilities outside their primary experience and expertise. First, the community planning process was slow, because plans had to be reviewed by several layers of committees.

Second, the response to changing conditions related to the increased demand for full-day services was slow. Third, confusion over who had the authority to make key operational and strategic decisions permitted disagreements between ECIM and UW management to escalate into full-blown, unresolved power struggles. UW management worried about serving substantial numbers of children and achieving sustainability.

Communication with funders and business leaders broke down because UW management and ECIM disagreed over what they should be telling these stakeholders. At the community level, lead agencies and providers received mixed signals about ECI rules and procedures. As a result, support for ECI declined among funders and business leaders, and confidence in the initiative suffered in the neighborhoods. Many of these assumptions turned out to be far off the mark, largely because the planners paid insufficient attention to demand, supply, and incentives.

The plan assumed that 71 percent of children would be served in low-cost, part-day programs. In fact, virtually all children were served in full-day programs, most in new centers. Hence, one major reason that ECI cost more per child than expected was that ECI provided more intensive services on average than expected. ECI underestimated the demand for full-time programs in part because it underestimated the proportion of eligible children whose mothers were in the workforce. Welfare reform—passed in Pennsylvania in the summer of —was relevant in bringing women into the workforce, but low-income mothers had already been joining the 13 14 A "Noble Bet" in Early Care and Education: Executive Summary labor force in growing numbers prior to welfare reform.

Moreover, a parental preference for full-day care is unsurprising if parents are given a choice of full- or part-day care and both options are largely or entirely subsidized. Large numbers of parents—whether low- or high-income, employed or not—are likely to prefer more hours of child care and education if they are offered at little or no additional cost. This is essentially the choice that ECI offered. This occurred for three reasons. First, ECIM believed that many existing providers operated at so low a level of quality that they were incapable of providing high-quality services.

Second, some community planning groups chose to exclude existing providers. Third, some existing providers chose not to participate, either because they considered the quality standards and monitoring process too intrusive or because they were informal, unregistered providers not wishing to become part of the formal child-care system.

Extensive reliance on new centers also meant that ECI had to endure the high costs of the startup period, during which center staff have to be employed but enrollment is relatively low. Such an assumption might have been reasonable for pre-existing centers, for which ECI intended to provide a capitated reimbursement amount for each child served.

In fact, however, the great majority of ECI children were served in newly established centers. Line item funding was provided for new centers, which needed to hire staff prior to enrolling their first children. Supply, Demand, and Incentives 15 When ECI centers opened, enrollments grew gradually over time and in most cases never reached percent of capacity.

In , average enrollment in ECI centers was As a result, operating cost per child was higher than projected in the original business plan. The fault here lies not with the lead agencies or the providers, but with the variable-cost assumption of the original business plan, which was not realistic. The planners underestimated all components of cost: operating, capital, and administrative.

Figure 5. The shift to full-day, center-based services dramatically increased both operating and capital costs.

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The third bar accounts not only for the actual service mix, but also for the fixed costs of operating new child-care centers. The simulation in this case was based on incomplete data, so the results should be interpreted cautiously.

Because a portion of operating costs may be variable, the estimate represents an upper bound. Nevertheless, it makes clear that the ECI business plan substantially underestimated costs because it did not recognize that operating costs in new centers would be largely fixed. In total, the two flawed assumptions explain as much as 65 percent of the difference between the planned and actual cost per child again, this is an upper-bound estimate.

Higher-than-expected central administrative costs account for 10 percent of the difference. Capital costs beyond those attributable to the service mix explain less than 1 percent of the difference. After accounting for underestimates related to service mix, fixed operating costs, capital costs, and central administrative costs of ECIM and UW, the remaining neighborhoodlevel costs for lead agencies and service provision explain 24 percent of the difference between expected and actual cost per child which may be a slight underestimate if the fixed cost adjustment is overestimated.

The theory of action virtually guaranteed that administrative costs would be high. In addition, planners failed to anticipate the predictable demands of parents and lead agencies, which moved the initiative toward providing the more-expensive, full-time, center-based care. Indeed, ECI ultimately looked quite different from what many of its original advocates and funders had intended. The obstacles were many. First, the benefits of high-quality ECE programs are diffuse, whereas the costs are concentrated.

Second, most of the benefits of high-quality ECE programs accrue over the long term e. Finally, voters and policymakers were and still are ambivalent about public funding of ECE.

Some voters and policymakers feel strongly that child care is a private responsibility of parents rather than a public responsibility of the state. The shift in the ECI service mix to full-day programs switched its public identification from an education initiative to a child-care initiative and increased its financial dependence on the existing state system of child-care subsidies.