Social Impact Bonds are just another form of privatization. Bad news for Special Needs students.


Pat Quinn brought Social Impact Bonds to Illinois.

Special education advocate Bev Johns has written here warning about the impact of Social Impact Bonds on special education services.

What are Social Impact Bonds (SIBs)?

They have become a favorite privatization tool of corporate Democrats and others.

Wall Street loves them.

Also known as Pay for Success programs in which Wall Street investors, often using funding from private philanthropies, invest in social programs which once were funded directly by the government.  The aim is to reduce government costs by offering profits to Wall Street.

And Wall Street gets a pretty good return on that investment.

When the first cohort of students enters kindergarten, CPS will begin paying the lenders for each fewer child who needs special education services when compared to the control group. CPS will pay $9,100 per child annually, an amount that increases by 1 percent each year.

The city did not provide Catalyst with a breakdown of how it calculated the $9,100 figure, but said it was “based on the time that teachers spend with children with specific learning disability types and the cost associated with that time per student.”

Who determines what counts as success?

When it comes to special education programs and SIBs, success is quantified by counting how many special needs students are moved out of the programs and how many have services removed or denied.

It is just the opposite of what we have fought in favor of for decades. For those of us who have taught Special Needs students, either as general education teachers, special subject teachers or special education teachers, we look at success as meaning accurately identifying the needs of individual students, providing evidence for those needs, and getting service and support to those students. We never considered  that if we determined there was a continuing need to provide services to a student it meant we failed.

We don’t look at special education students in the aggregate. That is the opposite of the essence of the IEP,  the Individualized Educational Program.

SIBs were brought to Illinois by Democratic Governor Pat Quinn. 

The program was supposed to be run through the Governor’s Office of Management and Budget under Quinn. Like a lot of what goes on in Springfield these days, it is not very transparent how it is working under Bruce Rauner.

Rahm’s pre-K program are funded by SIBs. 

The program, which Chicago officials said is the fifth social-bond program in the U.S., is meant to increase students’ readiness for kindergarten, improve literacy and lower the need for special-education programs.

Lenders will benefit from the savings that Chicago Public Schools will reap as less intervention is needed in later years, city officials said. Goldman Sachs Social Impact Fund and Chicago-based Northern Trust Corp. are the senior lenders, and the J.B. and M.K. Pritzker Family Foundation is the subordinate lender.

“There is nothing that’s more important than our kids,” Emanuel said in the statement. “Giving them a quality education from day one and helping provide their parents with the tools to be consistent and active partners in their children’s education is the best investment any of us can make.”
And providing a new market for Wall Street investors.

10 thoughts on “Social Impact Bonds are just another form of privatization. Bad news for Special Needs students.

  1. But CPS is broke ! Where are they going to find the $9,000 + per student to pay Goldman?

    Of course this is all on the premises that all children who go to pre-K will avoid having a learning disability and not have the need to the special education services.

    1. Cheryl, I would be willing to bet that Rahm and company are thinking once they start getting the special ed label off these students they’ll be able to start doing away with Special Ed teachers. That ought to free up a few bucks for those ($9,100) incentive pay offs to the banks.

  2. The whole concept, even if you believe the alleged noble intent (I don’t) boggles the mind. We have to incentivize people to “do good”? Isn’t that akin to paying people to volunteer?

  3. We have a system to place children from special d to general ed-it’s called the IEP Conference.
    With money involved, I’m afraid that “quotas”, for administrators and teachers to push students off services, are just around the corner. Maybe this number will become part of a rating. This whole idea is heart-breaking.

    1. Yes. But if a child needs special ed services, it is not a failure. If they no longer need a service, it is not a success. It is meeting the need of an individual student. This Pay for Success turns that on its head.

  4. Thank you so much for telling it like it is with social impact bonds/pay for success contracts. I agree wholeheartedly with the many concerns already laid out here. At first, SIB proponents claimed that this funding mechanism would shift risk away from the public sector to implement innovative programs. But what’s happened in Chicago and in Utah’s pre-K situations is the opposite. Even Goldman Sachs acknowledges that PFS is better suited for expanded an existing program. In other words, investors will put money into programs that they know work. These deals minimize risk to the investors, and instead privatize the savings. I’d like to know what Chicago is already doing with the “cost savings” from avoided special education (so many problems with this rubric as already mentioned by other commenters). And lastly, where is Chicago going to come up with the money to continue funding the expanded pre-K when the PFS deal is over? I’m disappointed in the mainstream reporting on SIBs. Thank goodness for blogs like this, and independent reporting from The Catalyst and Nonprofit Quarterly.

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