Thursday, August 31, 2006

The Efficiencies of Charity

I have been planning a series of posts for about 2 weeks now explaining a concept called Distributionism. As I was casting about for a good topic to illustrate the core ideas underlying Distributionism, I came across an article by Naomi Klein. While the article as a whole is a joke (the U.S. is going broke? That girl needs to look up the term ‘ratio’), her mockery of the idea of the private sector being more efficient than government (indeed, she assumes her readers will laugh hysterically at the idea) got me to thinking.

Who in their right mind thinks the government is more efficient at anything?

Let’s take a look at a ‘darling program’, one of those programs that every single senators and congressmen feels they absolutely have to vote for. A program so beloved that not voting for it can haunt your political career for decades. The one I will pick is…. Head Start.

Head Start was begun in 1965 as part of LBJ’s Great Society plan, particularly the War on Poverty. The goal was to get kids ready for school before they began, especially poor kids. It provides early education and a meal to kids and has done so for over 40 years. It began as an eight week Summer program, but now ranges from pre-natal care to health screening and pre-school education that can last all year.

I am not going to go into the debate over the effectiveness of Head Start, or the necessity of Head Start, or any of the other controversies surrounding this program. No, I am going to focus on something a little different. Is it the best use of our money? Let’s assume that pre-school education works, and that kids that get at least one decent meal per day during the week have fewer health and education issues, and that being socialized into pre-school is not detrimental to behavior. Fine, let’s assume these are all true. Is there a better way to do these things?

The majority of Head Start participants are 3-5 years of age and only participate during the school year, usually in the mornings. There is also a program called Early Head Start that covers prom pregnant women to the time that the young children are eligible for Head Start. Nailing down the precise per-child price of head start is tough (for example, the Wikipedia entry I linked above states that the cost is about $7,200 per child when the count of participants and budget in the same entry actually indicates that it is closer to $7,600 per child), but it can be found. The Administration for Children and Families states that Early Head Start costs more than $10,500 per child while Head Start proper is $7, 543 per child (don’t trust their total – do the math for yourself). Of their budget of about $6.6 billion dollars they claim that about #233 million goes to research, development, and administration, meaning that about 3% of their budget goes to overhead.

That seems pretty efficient, doesn’t it? I mean, that rivals Feed the Children, one of the largest charity organizations on Earth. Like Head Start, Feed the Children focuses on feeding hungry kids (obviously) but also provides basic education, health screenings and basic services, and even pre-natal care. These two very similar organizations provides similar benefits and Feed the Children is rightly praised for having merely a 3% overhead. It seems that government can be as efficient as the private sector (well, charity sector) after all, right?

Don’t make me laugh. First of all, the Office of Management and Budget admits that the Head Start Budget is structured in such a way that ‘all administrative overheads cannot be determined’. In other words, the Department of Health and Human Services and Administration for Children and Families do all of the actual administration out of their own budgets to effectively hide the real cost of running and managing Head Start. This means that the 3% overhead seen as budget line items is in addition to the salaries paid to all the of the civil servants that run Head Start as part of their daily routine at HHS and ACF. The listed overhead also does not include the costs of developing training guidelines for the Head Start teachers (that is part of the budget of the Department of Education), printing up the guidelines, programs, handouts, training requirements, etc. associated with the program(also the Dept. of Ed.). Also stashed in there is more overhead – internal administrators. While the ACF lists 213,000 paid Head Start staff members, there are only about 50,000 paid Head Start teachers, meaning that the other 160,000+ staffers are administrators, clerks, etc. The complaints about the (relatively) low pay of the teachers also indicates that these staffers are probably better paid. Heck, if they are only paid an average of $25,000 a year, that means the admin salary overhead is about $4 billion a year, or about 58% of the total budget!

Don’t forget the 10,000 plus local, county, and state administrators of local Head Start programs (all of whom receive their salary from either the local government or local school district) as well as the fact that Head Start happens in local schoolrooms, often adding to local administration costs. Another key aspect of the local Head Start programs are the many volunteers involved in the process. Indeed, unpaid local volunteers outnumber paid dedicated Head Start staffers by more than a factor of 6. This means the relatively low costs of Head Start are subsidized by over 1.2 million unpaid volunteers.

Those local operations are very interesting. The ACF report lists the budget and enrollment levels, and in some cases the racial makeup of Head Start. The majority of poor in America are White, yet Head Start enrollment is less than 30% White. The majority of poor in America are rural, but the majority of Head Start participants are urban (see the above links). If Head Start were actually serving those in greatest need, it should look rural and White; instead, it is urban and Black.

Let’s look again at the core of Head Start; pre-school education and a decent meal. The effects (and duration of the effects) of Head Start education are hotly debated, let’s look at costs alone. The majority of Head Start participants are enrolled only during the school year, and only for part of the day. For the sake of being conservative, I will base all of the following numbers on a year round partial day schedule to cover the fact that some kids are in Head Start year round or all day, or both, but trying to keep it as middle-of-the-road as possible. The actual cost per child varies from over $10,000 to as little as a bit over $7,500, so we will use $7,500, as well. Since Head Start is overwhelmingly a weekday program, we will assume that kids attend about 250 days a year. This means that Head Start costs no less than $30 per day per child. While you may think this doesn’t sound too bad, let me remind you – this is to provide basic instruction in letters and numbers (similar to Sesame Street) and to provide a meal and a snack. Looked at that way, its pretty darn steep a price to pay. After all, 3% of the budget goes to overhead like research and program review, about58% goes to administration overhead, and the salaries of the actual teachers comes to an additional 7%, chewing up almost 70%, meaning that the books, construction paper, apples, and juice boxes are being purchased with less than $9.60 per child.

And that $9.50 a day or so is still no bargain! I don’t know about you, but I am a homeschooling Dad with 4 kids at home. Homeschooling my pre-schoolers costs us less than $400/year and Deeper Thought can feed the Airborne Philosophy Squad for less than $3.00 per kid per meal, snacks in between included. We do not have the government’s advantage of A) buying in huge bulk and B) not paying sales tax on our purchases. That means that our year-round daily cost for one meal tops out at about $4.00 per meal, less than half of the Head Start per meal cost. Another point to remember – the numbers above are a generous minimum! If I start using the highest numbers for Early Head Start, that meal, those snacks, and finger paints start edging up on $20 per day per child. This tells me that there is much more waste, overhead, and inefficiency lurking in Head Start, probably to the tune of an additional $5-$15 per child per day.

So while my family can certainly do better, can other institutions do better? Absolutely. Let’s talk about Feed the Children, a group I mentioned above. Feed the Children works to provide roughly the same services as Head Start, albeit all over the world. They openly publish independent audits of their organization that shows where and how the money they receive is spent. Their calculated over head comes to 11%, meaning that for every $30 they spend on a kid, that child receives about $26.70 in food, goods, or education. In fact, what Feed the Children states is that they will feed an American child for a grand total of about $0.25 a day, or roughly 1/40 the cost of Head Start. This level of efficiency allows Feed the Children to provide services world-wide, including disaster relief, and to serve many more kids with much less cash than Head Start.

And Feed the Children is considered to be fairly inefficient, as charities go. Their creation of their own distribution network means that other charities, like Save the Children, with a mission very similar to Feed the Children, but with a greater emphasis on education and health, has an overall efficiency of about 91%, roughly 3% less overhead than Feed the Children. Of course, all national and international charities pale in comparison with that bulwark of American charity – the local church. It is estimated that local churches and parishes, be they Baptist, Catholic, or Lutheran, have a nearly 98% efficiency. Indeed, many churches try to create an endowment that covers all salaries and taxes so that charity donations are 100% to charity. Additionally, such local charity functions as gathering donations of clothing or food are 100% efficient. As a matter of fact, Head Start can chalk up what little efficiency it does have to local action; after all, if they had to pay all those local volunteers even one-fourth what they pay their teachers, it would come to an additional $6 billion a year in their salaries alone.

As we can see, private organizations are more efficient than government organizations. More importantly, local organizations are more efficient than global or national organizations. In this case, if the $6+ billion of the Head Start program were instead used by a group like Feed the Children even if the efficiency of that organization was cut in half the number of children receiving education and food would grow by no less than 150%, all at no increase in costs. This is a key element in Catholic teachings on social justice and society; the concept that local is better.

Next time I will be discussing the ideas of Subsidiarity and Solidarity.

NOTE: Deeper Thought informed me that $3.00 per child per day is actually the ceiling of what she spends, including our forays into fast food.

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