Organizers of Utah’s privately funded preschool program stand behind model after NYT criticism

November 6, 2015

Utah government officials, community advocates and investment bankers joined together last month to tout the early success of a preschool program funded through a private loan.

Out of 110 at-risk students who were academically behind their peers when the program started, only one required costly special education services during kindergarten.

That led to a $267,000 check for Goldman Sachs, which paid preschool enrollment costs for 600 students through Utah's first social impact bond and, along with J.B. Pritzker, will receive 95 percent of any special-education savings to the state until their loan is repaid with interest.

Then came The New York Times with a big wet blanket.

"Here they seem to have either performed a miracle, or these kids weren't in line for special education in the first place," said Queens College professor Clive Belfield, one of nine early-education experts who reviewed Utah's pay-for-success programfor The Times.

As even well-funded preschool programs reduce special education needs by 50 percent at most, the experts said, the supposed success of Utah's relatively inexpensive model, at about $1,700 per student, is too good to be true and the result of a flawed program.

Organizers of the School Readiness Initiative stood behind their creation, dismissing the criticism. "Simply put, it's wrong," United Way of Salt Lake President Bill Crim said. "We don't have any concerns about the methodology."

Crim told The Tribune that the primary goal was never to end special education. Instead, he said, organizers were aiming to make high-quality preschool available for the children who need it most. 

Traditional funding was not available to make that happen, so they went for the loan. Goldman Sachs and J.B. Pritzker have committed $7 million to the program, which will fund five cohorts of preschool students. The first cohort included about 600 children, Crim said, the majority of whom showed no signs of needing special education. 

Special education costs are used as the metric to calculate repayment of the loan, based on the students who are likeliest to enter kindergarten behind their peers. The first round of repayments is being made by United Way and Salt Lake County, which committed $1.3 million in an effort to show lawmakers that the financing model could be successful. State funds will repay the firms for the remaining four cohorts.

Salt Lake County Mayor Ben McAdams said the criticism speaks to the advantages of a pay-for-success model.

Rather than government funding services with no clear objective, he said, a social impact bond allows for investment against measurements that can be scrutinized, refined and improved. 

"This preschool pilot, I think, has succeeded beyond our expectations and it is one we look to continue," he said.

In a prepared statement, Goldman Sachs spokeswoman Leslie Shribman said the social impact bond will allow thousands of children from low-income families to attend preschool in the coming years.

"The pay-for-success financing mechanism is meeting its goals: providing upfront capital for a public-sector priority, while transparently measuring outcomes that allow the government to pay only for success," she said.

But The Times' panel of experts questioned whether that success is real or designed in a way that ensures repayment to investors. 

They said the assessment given to students as they enter the program, the Peabody Picture Vocabulary Test (PPVT), is a poor indicator of special education needs and is known to produce low scores among English language learners. 

"To just assume that all these children would have gone to special education is kind of ridiculous," Ellen Peisner-Feinberg, a scientist with the Frank Porter Graham Child Development Institute, told The Times.