Clever equity investors! Goldman Sachs is profiting by investing in Social Impact Bonds, which pay off by helping pre-schoolers avoid placement in special education. The pilot program is in Utah. Goldman Sachs makes money for every child who is not referred to special education services.
But critics are skeptical:
“Nine early-education experts reviewed the program for The New York Times and identified irregularities in how the program’s success was measured. These seemed to significantly overstate the effect of the investment.
“Goldman said its investment helped almost 99 percent of the Utah children it was tracking to avoid special education.
“Researchers say well-funded preschool programs can reduce the proportion of students needing special education by 50 percent at most, usually nearer 10 or 20 percent.
“The success rate in the Utah program was based on what researchers say was a faulty assumption — that many of the school children would have needed special education without the preschool.
“This overstatement means that Goldman and its philanthropic partner, the J.B. & M.K. Pritzker Family Foundation, received more in payments than they should have. The bank was paid for each at-risk child who ended up not needing special education after leaving the preschool program.
“The Utah school district’s methodology, which led to large numbers of children being identified as at risk, was adopted by Goldman when it negotiated its investment.
“As long as 50 percent of the children in the program avoid special education, Goldman will earn back its money and 5 percent interest — more than Utah would have paid if it had borrowed the money through the bond market.”
Diane Ravitch's blog 
In addition to incentivizing more children to be labeled “at-risk”, social impact bonds also incentivize gaming the system so that fewer kids actually end up needing special ed. I’m more worried about the kids who need special ed not getting it than I am about kids being labeled “at-risk” who aren’t (although I’m equally worried about Goldman Sachs profiting off of both).
Reblogged this on Kmareka.com and commented:
Rut-ro.
It’s my understanding that the many “snake handlers” have been bitten and died. Why would one not realize that handling the snake that is Goldman Sachs wouldn’t result in being bit is beyond me.
You’re right Duane,
Only a fool or a crook getting a kickback would allow Goldman Sachs –which was charged by the SEC with defrauding investors to the tune of a billion dollars and which Matt Taibbi called a “gigantic vampire squid” — to have involvement in anything remotely related to special education.
Rand Paul is in Miwaukee for the debate, but he took time to discuss his thoughts on privatizing education. One has to wonder if he saw the recent CREDO report regarding online learning. http://www.jsonline.com/news/statepolitics/rand-paul-says-he-would-lift-income-caps-on-voucher-schools-b99613719z1-344896212.html
I don’t think view these investments as anything more than gambling on the lives of special needs children – SHAMEFUL!
Also, too, does Prudential. Prudential is in bed with Aggassi, Team Charters, Kipp Charters, and the whole lot. They are doing “social good.” Aren’t they?
I’m curious to know what the effect of this program has been on those who work in preschool programs in Utah. Are preschool teachers and those working in special education feeling pressure to reduce the number of children whom they refer and/or identify as having special education needs? If so, this program is reprehensible, and should be grounds for lawsuits. Children’s civil rights are at stake here, folks.
I’m sure that there is a lot of pressure to keep kids out of special education, rather they need it or not. It’s already pretty hard in Utah to qualify kids for special education, and nearly every kid with special education needs are either mostly or fully mainstreamed, whether that is good for the child and the school or not. This probably just makes it worse.
The problem is that the pressure tends to be subtle, and Utah teachers tend to be a GAGA type of group (tm Duane), so even if the pressure is happening, it likely won’t be reported by the teachers.
Well, well, Utah is again showing how to privatize. Big surprise (sarcasm). This was NEVER reported in the media until these bonds were around for a year or so. Welcome to the transparency of Utah government (we got a D-!).
The NY Times story seemed to imply that the Utah school district used faulty formulas to determine “success” and Goldman Sachs went along with it. The story also points out that at 8% interest, these loans are not better than traditional school financing.
Note: Head Start is such a good investment, it is worth $7 for every $1 the government puts into it because mothers are able to work, etc. Pay for Success takes that $7 in savings and gives it to Goldman Sachs instead of the government. It will actually cost the taxpayer more to fund preschool than ever before.
I am familiar with the beginnings of the program. It began 10 years ago with a five million dollar grant from the federal government. Basically the preschool used the kindergarten program for children as young as two. It was originally supposed to be for children between three and five. Apparently if a child repeats the program enough times and the child magically looses his/her disabilities.
Anyway, as a teacher in the original program, I had concerns about the testing protocol being used. At first they tested all children entering the full day program on letter naming and sounds, the child’s ability to hear beginning sounds and match rhyming words. There was also a vocabulary and speech/language test and dibels screening. Dibels states in its own protocol that the test is not reliable or valid for children in preschool. At the end of the year, they only retested children going on to Kindergarten. I believe it was a form of fudging the numbers.
There were numerous other problems with this program as well. I had already taught in a private accredited kindergarten/ preschool before going to school to earn an early childhood degree. My personal and professional experience told me that the program was very poor! It was a test preparation class for pre-schoolers. That becomes very apparent when one looks at the other issues that were in the program.
In my classroom, I was provided two shelving units. They were top heavy and tipped over unless braced, even when placed against a wall. The idea was that they could be used to create learning centers or areas. They were also too tall for a sitting adult to see over. Both of these problems were major safety issues. I was given three work tables, a wooden fridge and stove for dramatic play. But there were no dolls, dishes, dress ups, blocks, puzzles or other small toys. I had a sand/water box with a drain that leaked, but no mediums to put in it. No easels for art and no art supplies. There was no paper, pencil sharpener, pencils, scissors or crayons. I was expected to provide them myself. There was a lending library that the district was proud of. It had items to use in the dramatic play center but the library was across the city and closed by five. I had children until 3:30. I couldn’t get there in time.
The program failed to live up to the basic codes required by state licensing of early childhood programs. The children took rest time by laying on a parent provided towel on the floor. The room was paneled but wood was splintering. There was no air conditioning, in the summer the room was often over 120 degrees. Students ate lunch in the school cafeteria on benches meant for larger children. Their feet could not rest on the floor and while sitting, the children’s eyebrows were level with their lunch trays. The children’s playground was also questionable.
When I hear accolades about this program, I want to vomit. I am hopeful that the program has evolved, but I can’t help but remember all the problems. I had a union representative come and look at my classroom. He recommended that I sue the district. I knew that would end my teaching career. I chose to move on.
This makes me absolutely sick! Once again they will stop at nothing to screw the public and make a profit. It’s just wrong and they keep getting away with it!!!