Goldman Sachs isn’t good at identifying special education students.

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Students in a preschool program in Utah meant to help kindergartners avoid special education.

Bev Johns and I have been posting here about Social Impact Bonds (SIBs) and Pay for Success.

Pay for Success is a program funded by SIBs. It partners Wall Street investment firms, corporate philanthropies and the state in funding social programs because states do not have the resources to adequately fund them themselves. In reality, it is nothing more than a new profit center for Wall Street investments at the expense of the public.

On Tuesday The New York Times reported the results of their study of the claimed results of Pay for Success in Utah at reducing the numbers of special education students.

The New York Times panel questioned the metrics used in the Utah Pay for Success efforts.

Goldman said its investment had helped almost 99 percent of the Utah children it was tracking avoid special education in kindergarten. The bank received a payment for each of those children.

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.

“We’re all happy if Goldman Sachs makes money as long as they are making it with smart investments that make a real difference,” said Clive Belfield, an economics professor at Queens College in New York, who studies early childhood education. “Here they seem to have either performed a miracle, or these kids weren’t in line for special education in the first place.”

The concerns about the program are a reminder of how hard it is to properly structure public-private partnerships like social impact bonds, which depend on easily verifiable and commonly agreed-upon methods of measuring success for goals that can be hard to define, such as student success.

Here in Chicago, Rahm Emanuel has incorporated the Pay for Success model in the CPS early childhood program. And the two congressional versions of ESEA include the use of Pay for Success by name.

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