When Illinois Democratic Party gubernatorial candidate J.B. Pritzker touts his involvement in early childhood programs, he is mostly talking about his family foundation’s investments, along with Goldman Sachs, in Pay for Success social impact bonds.
In Chicago, CPS and Mayor Rahm bought into the idea of social impact bonds for early childhood education.
For each child that the system pushes out of special education services, investors such as Goldman Sachs and Pritzker are paid a return of $9,000. The financial incentive for not providing services to students whose disability may require long-term services seems obvious and dangerous.
Incentivizing the reduction in special education services is not in the interest of special needs students.
I have to wonder what state legislators across the country are even thinking anymore. They are selling out public education to corporations and investors. New Hampshire couldn’t even give this an accurate fiscal note because it is, when you break it down, a bet. A bet that had disastrous consequences in Utah and Chicago Public Schools according to education blogger Fred Klonsky. I wrote about how the legislative apparatus for Social Impact Bonds already happened in Delaware and just today, the Delaware Republican Senate caucus revealed a Poverty Agenda Plan that includes Social Impact Bonds as one of their steps to eliminate poverty. While it is not known if this plan would include educational “pay for success” programs, I know not all of the GOP Senators in Delaware would even want this kind of program in education.
Most of the Social Impact Bond activities in education would seem to be a violation of federal IDEA special education law. Corporations and special education are like oil and water. The former has no reason to be involved at all while the latter is a necessary step towards success for students with disabilities.
It appears that J.B. Pritzker’s “involvement” in early childhood education includes having his family foundation receiving hefty returns on CPS students not receiving the special education services they may need.
Chicago’s nearly $17 million Social Impact Bond Program is structured to ensure that its lenders, the Goldman Sachs Social Impact Fund and Northern Trust as senior lenders, and the J.B. and M.K. Pritzker Family Foundation as a subordinate lender, are only repaid if students realize positive academic results. The Program’s goals include: increasing Kindergarten readiness, improving third-grade literacy, and reducing the need for special education services.
FINANCIAL TERMSThe investment in the program is a senior-subordinate loan structure. Goldman Sachs Social Impact Fund ($7.5M) and Northern Trust Company ($5.5M) are senior lender, and The J.B. and M.K. Pritzker Family Foundation is a subordinate lender. Senior lenders will receive payments first until 2022, and subordinate lenders receive payments for additional special education savings until the final cohort completes 12th grade. One-off payments are available per student on the program for i) increased kindergarten readiness ($2,900), and ii) increased third grade literacy ($750). A payment of $9,100 is available for each student that avoids special education, annually compounding at a rate of 1.0%. The outcomes payments per student are equivalent to 95% of the avoided special education costs per year, assuming that the student requires special remedial education from kindergarten until 6th grade.
PERFORMANCEAn April 2016 performance report indicated that 59% of the children who participated in CPC preschool during 2014-15 had kindergarten readiness ratings that met or exceeded national averages. Investors received an outcomes payment of $500,000 based on the kindergarten readiness results for the first cohort.
Not bad a financial return, JB.
Unless you’re a student who needs services and isn’t getting them.