Yes, Social Impact Bonds. Again.

I've written about Social Impact Bonds, aka, Pay for Success (PFS) before. You can read those blog posts here, here, and here. I provided testimony on Pay for Success to the US Department of Education (USDOE) in Washington DC at the Every Student Succeeds Act (ESSA) hearings. That testimony you can find here. 

This past Friday, August 19th, USDOE announced a Preschool Pay For Success grant competition. Instead of, y'know, actually funding a preschool initiative, USDOE has set aside $2.8 million dollars to go to "7 to 14 grantees" who will have the great privilege of conducting feasibility studies, not on the effectiveness of high quality preschool (we already know that works), but on the effectiveness of PFS. States will have to go out and find partners and then use the USDOE money to fund studies...studies which one really hopes states would have done on their own anyway. 

"The ultimate aim of the pilot is to improve early learning outcomes through a future high-quality Pay for Success project by providing grants for feasibility studies. However, the pilot does not fund the implementation of preschool services. Preschool programs that are the focus of these feasibility studies must be inclusive of children with disabilities and the Pilot will also establish safeguards to protect the rights of children with disabilities to ensure that they receive the services they need." (emphasis mine)

Who knows? Maybe they were listening to me last January. I'm very interested to see what those "safeguards" are beyond what the law already prescribes, because that shouldn't be ignored under any circumstances. Right? 

To backtrack for a second, there are Preschool Development Grants (and Expansion Grants) available through USDOE. In 2014, several states, including New Jersey, received those grants. Here's a brochure from the program. You'll notice that "high quality" programs are necessary for receiving the 2-year grant. 

Now, take a look at the program description for Pay For Success. 

"This pilot does not limit feasibility studies to programs that meet the definition of “high-quality” preschool used by the Preschool Development Grants (PDG) program in its 2014 grant competition in order to allow the PFS demonstrations to demonstrate high-quality in different ways, including through the impacts that the pilots are able to achieve. In this way, such projects could further develop the evidence-base of programs that are demonstrated to be effective." (emphasis mine)

*Sigh* Let's understand that statement for a moment. USDOE recognizes that "high quality" preschool programs are necessary and work. They are trying to find a way to help out their friends in the banking sector by attempting to justify the use of Pay For Success programs while also desiring successful outcomes for students. They want to demonstrate the cheaper-for-the-taxpayer-to-achieve-great-results-ness of PFS, but the studies USDOE will be paying for do NOT need to include "high quality" preschool programs. 

Surely there's a really good reason for that, I am, though, currently at a complete loss of what that might be. Anyone from USDOE is free to shoot me an email at any time. Or, maybe Mike Hynes can ask John King when he finally is granted an audience.

I'll simply say, Pay For Success is a terrible idea. In this context, our children's education is at stake. There has been a specific narrative from those pushing these programs. It's unconscionable that Pay For Success is sitting in the middle of a federal education law. I'm not alone in that thinking. 

Yesterday, Kenneth Saltman published an article called "Wall Street's Latest Public Sector Ripoff: Five Myths About Pay For Success" and it's a doozy. Please take the time to read it. I'll give you a teaser on Saltman's reason for the existence of PFS programs:

"Banks love Pay for Success because they can profit massively from it and invest money with high returns at a time of a glut of capital and historically low interest rates. Politicians (especially rightist democrats) love Pay for Success because they can claim to be expanding public services without raising taxes or issuing bonds and will only have the public pay for “what works.” Elite universities and corporate philanthropies love Pay for Success because they support “innovation” and share an ethos that only the prime beneficiaries of the current economy, the rich, can save the poor."

In the context of preschool and how PFS has been used to theoretically lower the rate of special education classification of children entering kindergarten, I could not agree more (and I said as much, months ago) with this: 

"Who is authorized to develop the metrics, what is their expertise, what are their interests, and how do they assess the rules they set in place?; To whom are those legislating the accountability measurements accountable? The scientism of metrics obscures these kinds of questions. Accountability should be a part of educational projects but not through restricted metrics that conceal the broader politics informing the project. Rather, accountability should be in a form in which knowledge is comprehended in relation to how subjectivity is formed through broader social forces and in ways in which learning can form the basis for collective action to expand egalitarian and just social relations."

If your state is entertaining using Social Impact Bonds/Pay For Success to pay for preschool, please, I beg you, have those conversations with your legislators. Know exactly who is determining the criteria for success and how the money will be paid back and to whom. 

Pay for Success Coming to New Jersey

This is truly one of those moments when I wish I hadn't called it, but here comes Pay for Success. John Mooney at NJSpotlight posted this story this morning. State Senator Ruiz has introduced two bills to pay for a new pre-school initiative. 

One involves the dedication of $103 million of state money. Read the full text of the bill here. The other bill is called “Early Childhood Innovation Act”. I love the names given to these things. Anyway, it's a "loan pilot" program. Let's call it what it is: Social Impact Bonds aka Pay for Success. You can read the full text of the bill here.  

I'm not going to go into all the reasons of why Social Impact Bonds are a terrible "solution" for New Jersey. I've already written about and testified against it. You can read all of it here, here, and here.

Keep private money out of public education. Do we need high quality preschool in New Jersey? Yes. Absolutely. What we don't need is Wall St. paying for it with the promise to earn that money back on the backs of our youngest and most vulnerable citizens. 

We ALL deserve better than that. 

Edited to add: Revised bill S973. 

The End of Special Education Part IV

This is really Social Impact Bonds (SIBs), aka Pay for Success, part 2. 

It seems that NJ Senator Teresa Ruiz, Chair of the NJ Senate Education Committee, thinks that SIBs may be a way to pay for the Committee's vision of Pre-K in New Jersey. Tuesday morning I heard a clip of Senator Ruiz on WBGO's news report. My jaw dropped.

Senator Teresa Ruiz says one recommendation is establishing a five-year pilot program allowing the private sector to pay for expanding early childhood education and then receive a portion of the state savings from that investment.

“It allows for programs to really develop more quickly because the funding is there, and certainly, later on, what we can look for is we will save money because we won’t have to have early-intervention programs and classification and wrap-around services because we did the work early on.”

Just. No. 

I wrote about SIB's here, but let me recap. Goldman Sachs funded a SIBs program in Utah. They claim a 99% "success" rate. In other words, 99% of the 3- and 4-year-olds who went through their funded program did NOT require remedial help or special education classification. Goldman Sachs received $260,000 in payment for those 109 out of 110 students. And will continue to receive payment for every year those students are NOT classified for special education. 

You know there are going to be questions, really basic ones, when you see "results" like that. Presumably, Senator Ruiz heard about those results and did not look further into the inevitable questions about the validity of those claims. 

What was the starting criteria for those students? What tests did they use? Medical history? Demographics? How many students would have likely had to have special education if they didn't have the "high quality" Pre-K experience? How many would they expect to classify even with the experience? What is "high quality" Pre-K? What does "high quality" Pre-K cost? How much does Utah spend on Pre-K? What is the threshold that has to be met for Goldman Sachs to earn its money back?

The NY Times DealBook took an unusual and distinctly skeptical look at the program.

A few weeks ago, Senator Ruiz held a hearing on Pre-K. All of the usual associations were there to provide testimony. All agreed that "high quality" Pre-K is essential to a good start in elementary school. It is even more important for children from certain demographics to have these experiences. 

A Rutgers professor of economics, Steven Barnett, testified that "high quality" (he put great emphasis on that) Pre-K could mean as much as a 50% reduction in the need to classify for special education, BUT that most studies show a 10-20% reduction. That is considered to be very good. In this context, 99% is not even statistically possible. 

So, how much did Goldman Sachs spend per student? A measly $1700, not even enough to cover part-time costs of daycare. Pre-Ks used in successful studies spent 4 to 5 times that amount. Again, what exactly is "high quality" Pre-k? Sounds like Goldman Sachs got off cheap.

Goldman Sachs also only had to achieve a 50% reduction to in order to make back their investment, plus 5%. What's unclear and I haven't found out yet is, who would have picked up the tab if the program "failed" and only achieved a 10% reduction? Would Utah have been on the hook for that? Or, would Goldman have simply written it off? Can we please acknowledge that no Wall Street firm is going to enter into a deal like this if they didn't expect to make money?

I'm also not sure what the point of bringing in Wall Street was. Utah, previously, had no Pre-K program. They didn't really even know what the costs are. Usually in Pay for Success, you're trying to show a savings on the government side...which is why in places like Texas, this kind of program has not worked with daycare. You simply can't show great savings if you're not spending any money on it in the first place. 

Now for New Jersey. What is Senator Ruiz attempting to achieve? Her statement, "we won’t have to have early-intervention programs and classification and wrap-around services because we did the work early on" is naive at best and potentially destructive at worst.  

"High quality" Pre-K is not a magic bullet. Students with disabilities will not be magically cured by attending preschool. It sounds too good to be true because it is. New Jersey's classification rate is about 14.5%, higher in low-income districts where this program will take place. 

Will preschool help decrease the percentage of students who need special education services in those districts? I have no doubt that it will. The research supports that presumption. 

Are you going to end the need for Early Intervention, classification, and wrap-around services? No. You aren't. There will always be students who would have been classified no matter how much preschool they had. There will always be students who need wrap-around services because we, as country, much less as a state, are doing nothing to address the poverty that creates the need for these services.

Big picture here is, Goldman Sachs is going to make money on students NOT being classified. RtI is going to become the framework for K-12, delaying as long as possible the identification and classification of students with disabilities. And the Special Education Ombudsman position the Senator is trying to create (because constituents have been begging for help) will work for the NJ Department of Education. 

This does not look good for the students with disabilities in New Jersey. Parents, it's going to be a really interesting (read: ugly) ride while all of this plays out. We don't need a system that further works against students and their families. Find another way to pay for preschool that doesn't involve a negative outcome on our most vulnerable students.