The U.S. Department of Education’s (ED) mission is to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access. ED supports initiatives to help expand opportunities and improve education for students from early childhood to adulthood, particularly approaches that are based on evidence of potential or actual success. Pay for Success (PFS) can be used to support evidence-based approaches by leveraging private investment to address societal problems and challenges while typically using government funds to pay only when measurable, positive outcomes are attained. This tool kit is an introductory guide for state and local governments and other stakeholders interested in exploring the possibility of a PFS project for education or related societal issues. It provides information to support stakeholders in determining if PFS is a viable financing strategy for them; it lays out steps usually involved in conducting a feasibility study and highlights critical questions and important safeguards to consider in using PFS. The Appendix includes tools that may be useful for PFS projects, including definitions of terms used throughout the document. …
… The Community Child Care Council of Santa Clara County—known as 4Cs, or 4C Council—lost Renales’ case file and fell behind on paperwork. She found out that the publicly funded nonprofit overstated her income by $5,800 a year, understated her family size and miscalculated her subsidy. The agency, which relies on roughly $45 million a year in government funding, has also fallen several thousands of dollars behind on payments to her child care provider, Action Day Primary. … Employees at 4Cs say that at least 100 cases went missing at one point, prompting a manager to order staff to stop what they’re doing and go on a “scavenger hunt” until they found them. Another source say 4Cs is so backlogged that in addition to missing files, there are more than 1,000 unassigned cases. … Last week, a handful of attachés from the California Department of Education (CDE)—the nonprofit’s primary funder—walked into the 4Cs north San Jose headquarters to begin an in-depth audit. … The 4C Council is responsible for subsidizing child care for more than 5,500 children in Silicon Valley. Since last fall, San Jose Inside has reported about the rampant dysfunction, crippling staff turnover, shuttered day cares and missing retirement payments at the 45-year-old agency. New details now indicate that the future of 4Cs—the South Bay’s single largest taxpayer funded nonprofit—grows increasingly uncertain. …
… Under Villaseñor’s leadership, day care centers have closed and families that depend on subsidies fear losing them because 4Cs misses deadlines. Day cares that depend on 4Cs to reimburse them have gone months without getting paid. … Contractors have operated with little oversight, leading to a lawsuit filed earlier this year against 4Cs for allegedly failing to prevent two girls from being sexually assaulted by an employee at one home day care. Despite tens of thousands of children in need of child care, according to a Santa Clara Child Care Needs Assessment, 4Cs struggles to meet enrollment targets and routinely fails to hire enough teachers to meet the one-per-eight student ratio. It’s not for a lack of funding either, as the nonprofit has returned millions of dollars in federal grant money in years past. … Other problems have only come to light because of a protracted battle between employees who voted to unionize. In February, San Jose Inside reported on a retiree’s pension payments being withheld. Two weeks after that story was published and seven months after her last day on the job, the retiree, Gloria Pena, got her first check in the mail. Meanwhile, four sources familiar with the situation say the nonprofit’s attorneys have admitted at the negotiating table that both pension accounts run afoul of federal law. According to union reps, Villaseñor also excluded an entire category of staffers from receiving pensions, misclassifying teachers and their aides as temps even if they worked at 4Cs for several years. …
In its push for high-quality preschool, Minnesota could turn to investment bankers and philanthropists for the upfront capital that lawmakers have been reluctant to provide. If preschool later proves to save the government money, whether on unspent special education services or by other markers, the investors would get back their seed money and potentially much more. The model, known as Pay for Success, was pioneered in Salt Lake City, where the investment bank Goldman Sachs and the Pritzker Family Foundation received their first preschool payouts in 2015. Sen. Orrin Hatch, R-Utah, succeeded in inserting the concept into the federal government’s new education policy law. The Minnesota Department of Education recently was awarded one of the first grants, worth $397,000, to explore the feasibility of using Pay for Success to fund early-childhood education. … Minnesota is looking to Pay for Success not for expanding preschool but for boosting the quality of existing public preschools that serve mostly low-income students. Officials are proposing a broad expansion of the so-called Pyramid Model, now used in only about 100 Minnesota classrooms. The framework offers increasing levels of support to children who need it and has been shown to boost social-emotional and academic skills. By training teachers and providing classroom materials and expert coaching, the department hopes to start thousands of 4-year-olds on a path for lifelong success. … The Minnesotans involved in the project also are looking at a long list of markers of success. Besides special education placement, they said they might track attendance and suspension rates, scores on social-emotional assessments and third-grade reading tests, and even teacher retention. Temple said that Pay for Success programs are administratively complex, and that it will be difficult to assign a monetary value to each outcome they intend to track. … The greater challenge, Forsberg said, will be figuring out who will pay those investors back. Quality preschool would figure to benefit many levels of government. Individual school districts and the state would save money if fewer students needed special education services. And if those students succeed in school and life, they won’t burden counties with the costs of incarceration or various social services. …
Source: Social Finance, October 12, 2016
President Obama held a nationally televised town hall last night highlighting the progress of his My Brother’s Keeper Initiative and the Administration’s commitment to better serve at-risk youth. In conjunction with the event, the White House featured the announcement of a $2 million grant to Social Finance and Jobs for the Future from the US Department of Education to develop Pay for Success projects in career and technical education (CTE) programs to help ensure that all young people can reach their full potential. … Pay for Success projects allow governments to tackle pressing challenges, such as narrowing the achievement gap, by expanding proven programs. “The Obama Administration supports Pay for Success because it is advancing proven, data-driven solutions that are getting better results for communities in need,” said David Wilkinson, Director of the White House Office of Social Innovation. “With this award, the Department of Education is expanding the Pay for Success toolkit.” …
U.S. Department of Education Announces New Pay for Success Grant Competition for Preschool
Source: United States Department of Education Press Release, August 19, 2016
The U.S. Department of Education announced today the availability of $2.8 million for a Preschool Pay for Success grant competition for state, local and tribal governments interested in exploring the feasibility of Pay for Success to expand and improve early learning. The feasibility studies will determine if this model is an effective strategy to implement preschool programs that are high-quality and yield meaningful results. … The grant program supports initiatives which are based on evidence; focus on outcomes; and improve early, elementary, secondary and postsecondary education, while generating savings for taxpayers. The studies will identify a broad range of measures designed to demonstrate improved student outcomes; potential cost savings to school districts, local governments and states; and general benefits to society. Potential outcome measures may include:
- Kindergarten readiness
- Later improved social and emotional skills
- Improved executive functioning
- Reduction in grade retention and in the need for later special education
- Reduction in discipline referrals, and interactions with law enforcement
- Increases in high school graduation.
… Pay for Success contracts are a fairly new idea. The first U.S. program launched in New York in 2012. They’re also known as social impact bonds. Whatever you call them, a Pay for Success contract is essentially a loan from the private sector to government in service of the public good. Pennsylvania identified five areas of focus: early childhood care and education; education, workforce preparedness, and employment; public safety; health and human services; and long-term living and home- and community-based services. … Theoretically, though, everyone wins: service providers have long-term commitments from funders to do good work; funders get to invest their money in programs they believe in; the government saves money and serves people in need; and people in need get tangible, effective help. And all of the decisionmaking relies on evidence. While it’s good to reward effective work, particularly since budgets are limited and lots of people need help, proving that societal change translates into financial savings every time can be tricky. In an article for the Stanford Social Innovation Review, V. Kasturi Rangan and Lisa A. Chase write that Pay for Success could be detrimental to the very populations that governments, funders, and service providers are trying to help. … It will be a while until Pennsylvania can gauge the success of Pay for Success. But the state, as well as the Harvard Kennedy School, the Corporation for National and Community Service Social Innovation Fund and the Pritzker Children’s Initiative, has invested a lot of time in trying to get this first round right: design and development for the two programs has been ongoing since January 2016. …
The city’s largest charter school operator suffered another loss Tuesday when a judge rejected its stance that prekindergarten classes should be immune from city oversight and regulation. Success Academy founder Eva Moskowitz had already canceled classes for about 100 pre-K students for the next school year after state education officials ruled that she must permit the city to monitor her pre-K lessons. Meanwhile, the fiery former city councilwoman took the city to court over the issue, where on Tuesday she lost again. …
Success Academy cancels pre-k classes after losing power struggle with Mayor de Blasio
Source: Ben Chapman, New York Daily News, June 2, 2016
The city’s largest charter school operator has canceled upcoming prekindergarten classes for about 100 students after losing a battle with the de Blasio administration over funding rules, school officials said Wednesday. Success Academy founder Eva Moskowitz would rather cancel the classes set to begin in September at five schools than submit to the city supervision that would accompany public funding for the programs, she said in a statement. … City Education Department spokeswoman Devora Kaye said the students whose classes were canceled would be eligible to apply for pre-K classes offered by other providers. … Moskowitz sought $720,000 from the city to pay for the disputed classes. Her charter school network took in a whopping $34.6 million for the financial year ended June 2013, the most recent year for which the data are available. …
A Brooklyn preschool special education provider, Yeled v’Yalda Early Childhood Center, claimed nearly $3 million in ineligible expenses for reimbursement, according to an audit released today by New York State Comptroller Thomas P. DiNapoli. “Schools for special needs children must properly account for their use of public funds,” DiNapoli said. “We have found too many schools that fall short of state education requirements, which is why we are auditing preschool special education providers throughout New York. We’ve referred our findings to the State Education Department for recovery of the misspent funds.” … Unlike most other states, New York’s SEIT programs are privately-run, some for profit and some not-for- profit. The programs submit annual financial reports to SED that include their expenses for reimbursement. Yeled, like many SEIT programs, offers other services, but the expenses related to these cannot be reimbursed by the state’s SEIT program. …
… It does to Salt Lake County Mayor Ben McAdams, whose “Pay for Success” program got skewered by The New York Times last week (“Did Goldman Make the Grade?”). You don’t have to be a Ph.D. to know that a rigged game brings predictable results. In the case of Salt Lake County’s program, at least two measures were completely off. They applied the wrong test (nationally the Peabody Picture Vocabulary Test is not used, especially by itself, to determine whether a child needs special ed) and administered it in the wrong language (the Spanish-speaking pre-schoolers were given the test in English). … And it’s good business for the investors, who get paid back, with interest, by Salt Lake County, United Way and, if the program continues, the state of Utah. Bravo, Salt Lake County, for investing in pre-K education. Boo and hiss, for defending a pseudo-scientific methodology that enables private capital to bilk public budgets and make money off public school kids.
“Pay for Success” Gaining Traction as ECE Funding Option, But Should It Be?
Source: Aaron Loewenberg, New America Ed Central, November 6, 2015
… The results of the partnership between Goldman Sachs and Utah were initially hailed as a pioneering effort, but recent questions have been raised about the program that cast it more as a cautionary tale. Several early education experts recently reviewed the specifics of the program and identified irregularities in the ways in which success is measured. Specifically, the experts point to a lack of evidence concerning the number of children who would have required special education services without the preschool program. It turns out that the success of the program may be overstated due to a lack of accurate means to measure success. … Critics claim that social impact bonds put private profit ahead of the public good. Specifically, Mark Rosenman, professor emeritus at the Union Institute & University, argues that too much use of social impact bonds could lead to cuts in public investment if government becomes too reliant on private financing. Rosenman criticizes investment groups such as Goldman Sachs that invest in social impact bonds while simultaneously working to avoid paying the taxes that typically fund public programs.
Success Metrics Questioned in School Program Funded by Goldman
Source: Nathaniel Popper, New York Times, November 3, 2015
Yet since the Utah results were disclosed, questions have emerged about whether the program achieved the success that was claimed. Nine early-education experts who reviewed the program for The New York Times quickly identified a number of irregularities in how the program’s success was measured, which seem to have led Goldman and the state to significantly overstate the effect that the investment had achieved in helping young children avoid special education. … The big problem, researchers say, is that even well-funded preschool programs — and the Utah program was not well funded — have been found to reduce the number of students needing special education by, at most, 50 percent. Most programs yield a reduction of closer to 10 or 20 percent. The program’s unusual success — and the payments to Goldman that were in direct proportion to that success — were based on what researchers say was a faulty assumption that many of the children in the program would have needed special education without the preschool, despite there being little evidence or previous research to indicate that this was the case.
Goldman Sachs paid to expand pre-K in Utah. It worked.
Source: Libby Nelson, Vox, October 19, 2015
The loan allowed Utah to expand the program to 595 more 3- and 4-year-olds last year, about half of the waiting list. All of them were from low-income families, and 110 were expected to need special education in elementary school. But this year, when students were tested in kindergarten, only one of them did. That saved the state $281,550, according to the United Way. Investors will get a payment of $267,473, with additional payouts to follow if the students continue not to need special education in grade school.
Goldman nets payout as social impact bond project in Utah meets targets
Source: Olivia Oran, Reuters, October 7, 2015
Goldman Sachs Group Inc and its investment partner will be paid $267,000 for helping to fund a philanthropic program that reduced the number of children needing special education services after preschool. The milestone marks a turnaround for so-called social impact bonds, which are issued by local governments in partnership with charities and private investors to fund philanthropic projects. Investors receive a return if a project saves public money. The first social bond project earlier this year failed to achieve its goals. … The results, which saved school districts and governments around $281,000 in total, triggered the first investor payment for any pay-for-success program in the United States. Goldman and Pritzker received a total payout of around 95 percent of those savings, or around $267,000.
For Goldman, Success in Social Impact Bond That Aids Schoolchildren
Source: Nathaniel Popper, New York Times, October 7, 2015
Financial results at Goldman Sachs are going to look a little bit better this quarter because of the educational success of 100 or so kindergarten pupils in Utah. … When the students were tested this year — after a year in preschool — and found not to need extra help, the State of Utah paid Goldman most of the money it would have spent on special education for the children. The payment represented the first time a so-called social impact bond paid off for investors in the United States.
The Greater Fairbanks Chamber of Commerce is recommending lawmakers continue cutting, renegotiate union contracts and consider privatization of services as part of the solution to the state’s fiscal crisis. … The document targets the departments of Education and Early Development and Health and Social Services, which together amount to about 60 percent of the budget. Unions also are mentioned as a way to control state spending. During the session, the Legislature had attempted to not fund negotiated pay raises before ultimately restoring them. …
Source: Ali Montag, CNBC, June 23, 2015
Goldman Sachs could be coming to a pre-K program near you. Or, at least, that may be the case in Pennsylvania. The state is proposing to implement social impact bonds, where private investors, like Goldman Sachs, can provide the upfront cash for legislators to address problems, like early education. … The state is nearing the end of a 30-day review period to get perspective from citizens. Wolf identified five areas of focus that the funding could go toward: Early childhood care, education, recidivism and public safety, health services, and long-term living. ….