Social impact bonds have attracted liberals and conservatives, as well as big banks, but can they really fund education?
Launched 50 summers ago as an eight-week program to prepare low-income children for public school, Head Start is part of the nation’s social safety net. Whether the gains it delivers are sustained years later is a matter of dispute, and those ongoing doubts are driving the current push among activists and politicians for universal preschool education that works, and that the country can afford.
The importance of early education is not disputed. Eighty percent of a child’s brain is developed by age 3, and kids born into punishing environments, who aren’t talked to and read to, are 18 months behind their peers by age 4, “a gap that almost never is going to be made up,” says Mark Shriver, president of Save the Children Action Network, who considers access to quality preschool “the most important social justice question of the day.”
Politicians agree that quality preschool is good and perhaps even necessary. But when it comes to government picking up the tab, that’s where everyone falls silent except maybe Bernie Sanders, who would raise taxes to pay for lots of things. With Republicans controlling at least one chamber of Congress for the foreseeable future, if liberals want to see expanded preschool in their lifetime, they will have to get creative.
The most innovative approach that Save the Children Action Network advocates in a white paper released on Capitol Hill on Wednesday is “social impact bonds” or SIBS. “The basic idea is private investors loan money to social service providers who are running programs these investors think are really promising and will have a clear payoff in successful results,” says Katharine Stevens with the American Enterprise Institute, a conservative think tank. “And if it works out, the government will pay them back.”
Goldman Sachs, through its Social Impact Fund, is the senior investor in a preschool project with the Chicago Public Schools. The Pritzker Family Foundation is the junior investor and will absorb the first losses if the project fails to meet expectations. If it succeeds, Goldman recoups its money based on money saved by the Chicago school system if more kids are ready for kindergarten, fewer kids are slotted into Special Ed, and if literacy scores are maintained into third grade.
Last week, an amendment to reauthorize the Bush-era No Child Left Behind legislation passed the Senate on voice vote with overwhelming bipartisan support to recognize SIBS as a vehicle to pay for early education. It was a big win for Save the Children. “Exciting as hell,” Shriver said, but even if the legislation gets through the partisan Congress, lack of funding remains a huge obstacle for quality preschool programs. “People ask me, ‘Why do you get so wound up?’ If we don’t do something soon, kids born today—four years from now will be so screwed—they will have a really impossible road ahead.”
Teachers’ unions don’t like SIBS and some liberals view Goldman Sachs investing in preschools as bowing to more privatization and tantamount to letting the fox into the henhouse. The notion that this is the end of unions or a Goldman Sachs takeover is “ridiculous,” says Shriver. “This is a way to supplement—not to supplant—government’s responsibilities” to educate kids. “It’s no silver bullet. It’s not going to be enough.”
The cost of universal preschool would be way up in the billions. For example, a “Strong Start for America’s Children” amendment offered by Pennsylvania Democrat Bob Casey had a price tag of more than $30 billion plus required state matching funds. A liberal wish list, it failed in the Senate along party lines. Even if Democrats had the majority, coming up with that kind of money would have been a deterrent.
In its white paper, Save the Children Action Network proposes several funding mechanisms for early education in addition to SIBS. They include repatriation of corporate money held abroad and sin taxes on gambling and E-cigarettes, all a steep climb in the tax-averse Republican-controlled Congress, plus preschool education would be competing with other worthy endeavors for these funds.
Another suggestion is to expand tax credits and deductions for parents to pay for preschool, but with major tax reform on the horizon for the next president, the current Congress in all its stalemated glory is unlikely to take any action in this area.
In the absence of any federal effort, programs funded by SIBS are popping up around the country on early education, child welfare and youth recidivism. “Experiments in democracy, if you will,” says Shriver. A preschool Initiative serving 2600 at-risk 3- and 4-year-olds in Utah has funding from Goldman Sachs and Pritzker. It has high-level bipartisan support in Congress. Utah Republican Orrin Hatch and Colorado Democrat Michael Bennet, former Denver Public Schools Superintendent, co-sponsored the amendment to include SIBS in the federal No Child Left Behind education update.
The goal is to identify promising preschool programs and then scale them up with private backing and ultimately government funds. Of the half-dozen projects launched so far in the U.S. (many more are international), the first, begun in 2012 to reduce youth recidivism at Rikers Island prison, was deemed a failure when the number of those returning to jail within 12 months remained the same. Goldman got its money back because the Bloomberg Philanthropies backstopped Goldman, but that’s not always the case. So what attracts these big investors? “They actually think they’ll get their money back in most cases,” says Stevens at AEI. “If you put your money in the bank, you get nothing. It’s a way from their point of view to make a social contribution that also drives government efficiency and effectiveness at the same time.”
When the Rikers Island project “missed its metrics,” Patrick Lester with the Social Innovation Research Project braced for the negative reaction. But Republicans saw the program’s demise as a measure of the concept’s integrity, that it wasn’t just more big government without consequences. “The notion that we pay for results is pretty appealing,” says Lester. “How many issues are there where you have Republicans and Democrats working together?”
Shriver founded the Action arm of Save the Children last year so the group he had been with for 10 years could legally lobby. “I got tired of politicians telling me I was doing God’s work, but when push came to shove, there was no investing. I hate to use the expression, but I was so pissed, it’s time to step into the arena and make a difference.”
Save the Children activists will be in the three early primary states, Iowa, New Hampshire and South Carolina, pressing the candidates on where they stand on early education. “Kids don’t give money to candidates and they don’t vote. So we want to be their voice. We want to be the NRA for kids,” Shriver said in an email. “To advocate strongly for kids, support those elected officials who vote for kids and oppose those who don’t. We want to ensure that promises made are promises kept.”
His father, Sargent Shriver, started Head Start as part of Lyndon Johnson’s anti-poverty program, and it endures despite partisan attempts to scale back funding and legitimate questions about its durability. “When I run something, I say if we don’t deliver good results, you should fire us. If the services are not helping kids enter kindergarten ready to thrive, they should not be funded,” he said. Save the Children has taken over some struggling Head Start programs, and Shriver says he welcomes rigorous accountability as the price for getting any money at all, whether it’s from Wall Street or the federal government.