Public Funding for Pre-K and its Risks and Opportunities in a For-Profit Provider’s Business Model

Public Funding for Pre-K and its Risks and Opportunities in a For-Profit Provider’s Business Model

The Request: Capstone advised a client on the potential acquisition of a for-profit early childhood education provider. Specifically, we evaluated the key policy-driven risks and opportunities arising from public funding for pre-K programs. Our diligence focused on both federal and a selection of states’ policies. We also provided the client with a scenario analysis based on Democratic presidential candidates’ universal childcare plans and President Trump’s second term priorities.

Background: Academic researchers, school administrators, policymakers, and other stakeholders have become more focused in recent years on what they argue to be the substantial long-term benefits of early childhood education to both children and families and to society as a whole. Universal childcare is increasingly a bipartisan issue, and governors in both parties are beginning to view universal childcare as their signature issue. At the same time, most state pre-K programs receive funding through states’ general fund appropriations, leaving funding levels vulnerable to economic downturns and budget deficits. As a result, spending varies widely across states on a per-pupil basis. Federal pre-K funding to the states remains an area of ongoing uncertainty. The decentralized nature of education funding and patchwork of federal, state, and local programs creates a complicated policy environment.

Our Process: Over three weeks, Capstone conducted a rigorous review of the public record of existing and proposed regulation and legislation. Through targeted outreach with highly relevant regulators, policymakers, and other stakeholders, we developed a comprehensive understanding of the policy nuances across the target company’s operating jurisdictions. This analysis helped our client to quickly see the risks and opportunities in a confusing patchwork of federal, state, and local programs and regulations.

Our Outreach: Capstone has engaged in dozens of conversations with education experts and stakeholders in the past few years. During our three-week engagement period for this project, we spoke with approximately two dozen key stakeholders, including:

  • National Institute for Early Education Research
  • Education Commission of the States
  • Center for Law and Social Policy
  • New York Early Childhood Professional Development Institute
  • Multiple state and local early childhood education agencies

The Outcome: Capstone provided our clients with an in-depth final report, as well as regular update calls and presentations, on the developing policy environment and the policy risks and opportunities that may affect the target company in the coming years.

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