The new Elementary and Secondary Education Act (ESEA) has passed the House, is about to pass the Senate, and will surely be signed into law by President Obama. Much like No Child Left Behind, a law called Every Student Succeeds sounds really great. But there is one aspect of the new ESEA that worries me. It has embraced the concept of social impact bonds, AKA Pay for Success.
All of these names sound pretty good, right? What could possibly be wrong with big investment banks like Goldman Sachs teaming up with social service agencies to offer preschool education to more children? Making a profit off of investing in education for one thing. Denying kids access to special education to make that profit for another.
Of course, as an early childhood director for over 20 years, I often made the argument for the benefits of quality early childhood education. I discussed it at community meetings as a way to level the playing field to give every child a decent start in life. I wrote about it in grant applications, saying things like:
- Giving children access to an excellent early childhood education is the key to the betterment of their lives and our community.
- Research confirms that children who attend preschool are more likely to succeed in school.
- While all children benefit greatly from preschool programs, it is even more important that children with special needs and children from low-income families attend.
- All children, regardless of ability, culture, language barriers, or family income, are entitled to equal access to quality early childhood education.
What I did not say was that a grantor should also be able to profit monetarily from investing in early childhood education, or that excellent early childhood education will eliminate the need for special education.
I have long wondered how anyone can make a profit from educating children. The federal government is folding social impact bonds into ESEA based on Pay for Success programs in Utah and Chicago. Let's start by examining how well the experiment worked in Utah.
In a New York Times article, Success Metrics Questioned in School Program Funded by Goldman, reporter Nathaniel Popper challenges the rosy outcome of the Utah preschool program. Goldman Sachs claimed to have helped 109 "at risk" kindergarteners (a 99% success rate) avoid special education services. The investment bank did this by loaning the state enough money to send the children to a preschool that charged $1,700 per year for each student. In return, Goldman Sachs received a $260,000 payout in the first year. Goldman's investment of $185,300 was pretty good, making a first-year profit of $74,700.
Pay for Success may seem like a win-win, but not for many of the children. According to the New York Times article, "The preschools that have been found, in previous research, to reduce the future need for special education usually cost four or five times what Goldman spent in Utah." These well-funded preschools reduce the number of students requiring special education by 50 percent and the average preschool reduces it by 10 to 20 percent. So how do we explain the supposed huge success Goldman Sachs paid for?
Either the children selected for the program were never going to end up in special education. Or even worse, children who did need services were denied them to make the investment look good. We would have to follow this group of children for several years to be sure the latter hypothesis wasn't true. If it turns out many children ended up needing special education services later in their educations, they were done a huge disservice by denying them the help they required as soon as possible.
Even though the Utah Pay for Success program raises many questions that warrant further study, Mayor Rahm Emanuel and Chicago Public Schools (CPS) thought this approach was a great idea and decided to pilot their own version. They partnered with Goldman Sachs, Northern Trust, and the Pritzker Family Foundation to lend CPS money with the promise of huge payouts down the road.
Chicago's plan for funding preschool social impact bonds works like this: Starting this school year and for three more years, CPS will borrow money from the investors named above to finance 2,618 children's educations in half-day Child-Parent Center preschools. The City will save $300 million over the duration of all of these children's educations if none of them end up in special education classes. Goldman Sachs will earn $9,100 for each student not placed in special education. CPS risks nothing by selling these social impact bonds, but pays the lenders substantial dividends for success (avoidance of costly special education services).
For the launch of the program, CPS identified six schools serving low-income families in communities that had a shortage of publicly-funded pre-K seats available. CPS and its teachers manage the expanded program in these schools for the current academic year and plan to expand to additional schools in future years. Two of the schools selected are rated five out of ten, which is the average rating for CPS, and one is actually rated a six. Three are rated below the CPS average, including a school with a rating of one.
What the schools have in common is poverty, ranging from 88.5 to 98.5 percent low income. They serve predominately Black or Hispanic populations and include English Language Learners and significant special education populations. The goal of providing quality preschool experiences for 2,618 children in these neighborhoods is a good one. No one can dispute that. But I have five questions I would need to have answered before I could endorse this plan:
- How are the early childhood programs determined to be high quality?
I ask the first two questions because of my concerns about developmentally appropriate early childhood education being replaced by inappropriate practices like rote memorization, worksheets, and direct instruction rather than learning through play. I also have serious concerns about the validity of the kindergarten screenings used to determine the need for special education.
My third question relates to the "fall off" factor for kids who participate in programs like Head Start. Once the services end, especially the family support and social services, the gains the children had made going into kindergarten disappear by later elementary school. So if the investment stops at the kindergarten door, how long will the children be able to sustain the gains they made?
I especially take issue with what my fourth question implies, that avoiding placement in special education is a valid measure of success and the way to make a profit for the investors. Of course, as we all know, there is an overrepresentation of boys of color, who are often diagnosed with conduct disorders or ADHD, in special education classes. Good early childhood programs may be able to avoid having children like these needing special services by providing educational opportunities and appropriate social services. Sadly, good early childhood programs also identify children with special needs who will require special education services to succeed. And many children's learning disabilities and emotional disorders do not become obvious until later in their educational lives.
This leads to the concern voiced in my fifth question. We are paying for "success," meaning avoiding costly special education services. The investors expect to earn money. Will that impact how CPS and other school systems that partner with financial institutions label children as successful? In Chicago's case, for example, if the effort fails to produce the desired results, CPS and the agencies administering the investment look bad and Goldman Sachs, Northern Trust, and the Pritzker Foundation lose money. Thus, there is a huge incentive to claim success and deny special education services.
- While the testing requirements are still there, states are given more latitude to adopt standards other than Common Core as long as they are rigorous.
- States may assess some skills in new ways, such as with portfolios of work, projects, and performance tasks.
- Testing can be spread it out across the year in smaller chunks.
- States may pass laws letting parents opt their children out of assessments, and schools must let parents know about their state's relevant policies on opting students out of testing.
- Schools no longer have to do teacher evaluation through student outcomes.
These may be improvements, or they may result in other problems. Only time will tell. But I am pretty certain encouraging the use of social impact bonds, especially to lower the number of children receiving special education services, is a really bad idea. If children are not identified as having special needs, they have no rights to educational adaptations required by the Individuals with Disabilities Act. Parents will have to fight even harder to obtain appropriate educational services for their children when there is a huge financial incentive not to identify them as needing special education.
My personal belief is that making a profit in education is intrinsically wrong. If a program is great and saves money, shouldn't the children be the total beneficiaries of the profit? I'm sure there are many better uses for the money than paying large dividends to investors. Perhaps our schools and children should be paid for their success by using any funds saved from avoiding special education services for some students to improve the services for those who do need them.