Have you ever wondered how budget makers and policy wonks are able to come up with how much money it takes to pay for something? A key part of understanding the value of goods is connected to our use of the consumer price index (CPI).

The CPI is tool that shows us the average changes in prices that people pay for goods and services on a daily basis.  It is a national standard that uses various urban areas to make the estimates. Estimates are collected on a monthly basis and take about 2-3 weeks to report. The United States Bureau of Labor Statistics is the organization that figures out the numbers and publishes the information each month.

It also helps us to understand spending patterns by people who live in urban areas. Learning these trends helps economists and analysts compare changes over time in cost of things like food and beverages, gasoline, airfare, utilities and medical care services.

In relation to policy, the CPI helps our governmental leaders when crafting budgets because it helps them to understand how much money it takes to pay for different services and programs. Particularly, when deciding how money is needed year to year for quality pre-K programs, K-12 learning, teacher’s pay, etc., we use the figure given from the CPI.

In previous blog posts, we have referenced “cost of living adjustments” and its relation to pre-K education. The consumer price index is often used to show changes in cost of living. So, knowing these changes helped us determine that a $16 million dollar increase is needed to help pre-K programs buy materials, feed students, pay teachers adequately, and provide other things that would sustain and retain its current quality.

Last week, Governor Asa Hutchinson released his budget proposal. Unfortunately, it did not reflect the cost of living needs of pre-K education. The Arkansas Better Chance program has not received an increase in funding since 2008. This is just one example of how important it is for our elected officials to make sure that programs and services have enough funding to cover their needs year to year as costs change.