What’s the latest on Pay for Success? Profits for investors.

The_Wolf_of_Wall_Street_42491

Here are some of my posts on Pay for Success, a Wall Street investment deal for public schools that returns to investors are based on not providing services to special education students.

https://preaprez.wordpress.com/2016/04/24/rick-perlstein-on-pay-for-success/

https://preaprez.wordpress.com/2015/10/08/selling-special-education-kids-on-wall-street/

https://preaprez.wordpress.com/2016/03/31/new-hampshires-senate-bill-503-would-allow-pay-for-success-social-impact-bonds-in-pre-schools/

https://preaprez.wordpress.com/2015/10/12/social-impact-bonds-are-just-another-form-of-privatization-bad-news-for-special-needs-students/

https://preaprez.wordpress.com/2015/10/09/cps-wall-street-investors-and-social-impact-bonds/

https://preaprez.wordpress.com/2016/02/26/essa-teacher-evaluations-and-pay-for-success/

https://preaprez.wordpress.com/2015/12/21/was-goldman-sachs-redacted-from-chicago-pay-for-success-ordinance/

https://preaprez.wordpress.com/2015/11/30/the-john-arnold-behind-pension-theft-and-pay-for-success/

Yesterday’s Catalyst brings us up to date on the latest profits made by Wall Street investors on Pay for Success at CPS.

Students targeted for special education services are down 41%.

Private investors who are paying $16.6 million for a four-year preschool expansion are now assured a $500,000 “success payment” for the initial outcomes—a first step toward a total payout that could eventually more than double their investment.

These first results from Chicago’s experiment in what are called “social impact bonds” showed that more than half the children from the first group of 374 preschoolers were deemed kindergarten-ready, triggering the big early dividend for Goldman Sachs and other investors.

Social impact bonds are a growing trend in public finance that are being used to pay for projects that target a range of societal problems—in this case, the lack of high-quality preschool for lower-income children. The bonds have the blessing of the U.S. Department of Education, even though, at best, they’ve had mixed outcomes in the cities where they’ve been tried out. Still, the new federal education law, called the Every Student Succeeds Act, will allow school districts and states to use some federal dollars to pay for social impact bond projects.

In Chicago, project leaders say these first-year results are an early indicator that the preschool expansion is going well. (See related story on the kindergarten readiness outcomes.)

“This is a very good first result,” says Jose Cerda, a spokesman for IFF, a lender and real-estate consultant to nonprofits that is administering the social impact bond project. “These findings are consistent with other national studies that have been done, with about half of the kids, roughly, being kindergarten ready after getting a sufficient dosage of the CPC program. So we’re all happy with that.”

But the expansion of a well-researched, decades-old preschool model called child-parent centers was an investment that critics say is without much risk. Indeed, the longitudinal research on child-parent centers, which require significant parent involvement and provide additional social services to families, has shown academic and social benefits that translate into long-term cost savings of $7 for every $1 spent by taxpayers.

And most of the payback to investors is tied to a riskier proposition that some experts view as problematic: an expected reduction in the number of children placed in special education.

Next spring, project leaders will release data on investor payments based on that metric, which city officials and investors agreed to because of research showing that children who attended child-parent centers had a 41 percent lower rate of placement in special education.

Was Goldman Sachs redacted from Chicago Pay for Success ordinance?

Screen Shot 2015-12-21 at 7.46.54 AM

“This record contains private information, which has been redacted from public viewing.”

As I have been reporting here, Pay for Success is a function of the expanding scheme of Social Impact Bonds (SIBs).

Wall Street investors like Goldman Sachs are paid profits for investing in social programs such as prison recidivism and special education.

In the case of special education, Goldman Sachs is paid for each child that does not receive special education services – what Pay For Success considers a success.

The criteria for success is not based on federal and state guidelines and requirements for assessing special education services, but on criteria established between the lender and CPS.

Catalyst has reported on Pay for Success and the Chicago Public Schools.

The evaluator will measure “kindergarten readiness” through an assessment that’s already used in CPS preschools. For each child in the “treatment group” who performs at or above the national average on at least five of the six sections of the assessment, the city will repay lenders $2,900. The city projects half of the children will score high enough to trigger the payments.

Meanwhile, third-grade literacy will be measured using the Partnership for Assessment of Readiness for College and Careers (PARCC), a new test to which CPS is transitioning this year. The new assessment is aligned to the controversial Common Core State Standards and is considered more rigorous than current state tests.

The projections indicate that half of third-graders will be at “grade level,” meaning they score at or above the 25th national percentile on reading portions of the PARCC. Under the agreement, the city will pay lenders $750 for each child that meets that benchmark.

The ordinances allowing the City of Chicago and CPS to issue Pay for Success SIBs were sponsored by Aldermen Thomas, Moreno, Ervin, Balcer, Suarez, and Mitts.

But was all mention of Goldman Sachs redacted from the ordinances when they were published by Susan Mendoza on the City Clerk’s web site?

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

03db-utahjp-master675

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.

Both House and Senate versions of ESEA include Pay for Success and profits for Goldman Sachs. Act now.

LLOYD BLANKFEIN

Goldman Sachs CEO Lloyd Blankhein. Double back earnings for “curing” special education students.

-Bev Johns

Education Week blog:http://blogs.edweek.org/edweek/campaign-k-12/2015/10/whats_the_state_of_play_on_ese.html

The pending departure of Rep. John Boehner, R-Ohio, the speaker of the House seems to have lit a fire under negotiations on reauthorization of the Elementary and Secondary Education Act.

In fact, U.S. Secretary of Education Arne Duncan said Monday that it could actually “help” ESEA’s chances if Boehner stuck around for a few more weeks.

Aides for all four of the lawmakers that will be involved in crafting a “conference report” (that’s Congress-speak for a compromise bill developed after both the House and Senate have passed competing versions) have been working very, very hard behind the scenes to reach agreement. The key lawmakers here are: Sen. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., and Reps. John Kline, R-Minn., and Bobby Scott, D-Va.

——————————-

As of now both the House and Senate ESEA bills include Federal funding for Pay for Success.

Below are actions YOU can take, and then my arguments for removing Pay for Success from ESEA as it is in Utah and Chicago aimed directly at vastly reducing special education (by 99 percent in Utah).

These are the parts of the U.S. House and U.S. Senate ESEA bills that need to be removed in the Conference Committee.

House ESEA (was No Child Left Behind): HR 5 – Student Success Act, Title II Subpart 1 Grants to States, Sec. 2113 (b)(2). “(F) support State or local Pay for Success initiatives that meet the purposes of this part.”

Title II Subpart 1 Formula Grants to States Sec. 2211 (d)(3)(A). “(ix) Supporting State or local Pay for Success initiatives that meet the purposes of this part.”

————————————–

Senate ESEA (was No Child Left Behind): S.1177 – Every Child Achieves Act (1) allows states and local school districts to invest their Title I, Part D funds (Programs for Neglected, Delinquent, and At Risk Children and Youth, $47.6 million in FY15) in Pay For Success initiatives; (2) allows local school districts to invest their Title IV, Part A funds (Safe and Drug Free Schools and Communities, $70 million in FY15) in Pay For Success  initiatives; and (3) allows states to invest their early childhood coordination funds (Early Learning Alignment and Improvement Grants, newly authorized program) in Pay For Success initiatives

—————————————–

In the Conference Committee between the US House and the US Senate we must get Pay for Success out of ESEA/NCLB as it is now in both the House and Senate versions.

It can be done, but it will not be easy.

Have you made any contact with the National organizations that you belong to?

Have you contacted your own US Representative and your 2 US Senators?

SAY TO YOUR TWO US SENATORS:

In Conference Committee on S.1177, please remove Pay for Success as an allowable use of funds through Title I, Part D (Prevention and Intervention Programs for Children and Youth Who are Neglected, Delinquent, or At-Risk) and Title IV, which funds programs addressing student health and safety, from the Senate version of ESEA on the ESEA bill.

SAY TO YOUR US REPRESENTATIVE:

In Conference Committee, please remove from H.R. 5, the Student Success Act, the provisions that make Pay for Success initiatives an allowable use of state and local funds in Title II and in the Teacher and School Leader Flexible Grant.

Pay for Success has been used in Utah to prevent 99 percent of children supposedly headed for special education from actually being identified for special education, and paid Goldman Sachs and other investors for each child NOT placed in special education. This is a huge financial incentive to NOT identify children as needing special education, and there is absolutely no research stating 99 percent of students in special education should not be there.

In Chicago, Pay for Success may allow Goldman Sachs to double its investment, depending on how many students are NOT identified for special education.

—————————–

Pay for Success reminds me of RTI (Response to Intervention) now often called MTSS (Multi-Tiered System of Support).

It sounds great, until you see what actually is happening in too many schools in too many States.

In an email discussion last week I received the following: “but from what I thought, Goldman Sachs and other investors get back money until the loan is repaid — and there is no big profit,just normal interest almost like a non-profit — but I may have it wrong”

I replied: You have it completely wrong. I had sent earlier a New York Times article on Utah, and a Catalyst (specialized education newspaper in Chicago) on CPS – Chicago Public Schools.

For Chicago, the deal is structured almost completely in Goldman Sachs (and their partner, the Pritzker Family Foundation – owner of Hyatt Hotels and of many other corporations) favor: almost no risk and possibly MORE than double their money back (more than 100 percent profit).

Read the New York Times article and Salt Lake Tribune articles on Utah.

Goldman Sachs is taking very little risk ($1 million is immediately paid back to Goldman by United Way) and with 99 percent of the students suspected of being eligible for special ed NOT being identified. Goldman would easily make more than double their money back (far more than 100 percent profit). Goldman is getting an immediate $1 million from the United Way? Not only will Goldman get public money each year that a student is NOT identified, but Goldman is getting charitable money immediately.

Non-profit Goldman Sachs? Hardly.

It is like getting $100 today and giving back $200 in public taxpayer money tomorrow.

Or having a credit card with a 100 percent interest rate. Identifying almost no one as having LD or any other disability is not progress.

Have you seen any program anywhere that has a 99 percent success rate?

Do you believe we can “cure” 99 percent of special ed children with LD or any other disability?

Or prevent 99 percent of children from having LD or another disability?

What would motivate a school district to NOT identify 99 percent of students earlier suspected of having a disability?

The answer ranges from the idealistic, I would say Utopian, to simple avoidance of Federal and State law and regs:

(1) they think (and say) that disability does not exist and now they are going to prove it and; (2) they really do believe (and say) that Each and Every child can be proficient on State or Multi-State tests and should be able to go to college: that special ed is counterproductive; (3) because they think it is the right thing to do for all children; (4) they think far too much is spent on kids in special ed when it should be spent on all kids; (5) this is a natural extension of RTI whose original promoters promised a significant reduction in identifications for special ed; (6) if a student is not identified as needing services under IDEA, the school does not have to provide specialized instruction, nor an IEP, nor an FBA or BIP even if needed, etc.; (7) if not identified, or if in RTI, the school is not subject to IDEA or its regs for that child, and neither the parent nor the child have any legal rights under IDEA .  

In fact IDEA so states.

(8) Another direct incentive for schools to non-identify is that they then are NOT subject to State laws and rules, such as any limits on special education class size, etc.