Noble Goals Funded With Public-Private Partnerships — What Could Go Wrong?
” Hell isn’t merely paved with good intentions; it’s walled and roofed with them. Yes, and furnished, too.” — Aldous Huxley
Once again the senate introduced a bill that would create a preschool program, effectively expanding our public school system. It is wrapped in an experimental funding program called social impact bonds (SIBs); a type of public-private partnership. It is not “free” money; SIBs are loans. They appeal to many because theoretically, if the social reform initiative fails, the investors, not the taxpayers, bear the risk. So far these programs have not produced their intended results and in some cases, the public still paid the bill. Good intentions are not enough.
SB 503, a bill that would create a commission to implement a SIB funded preschool program, was introduced to the Senate Education Committee on Tuesday, February 2nd. The bill may have an executive session at any time, so contact the Senate Education Committee as soon as possible. The following is the committee’s contact information. Brief and polite phone calls are most effective, but emails are also helpful. Particularly mention if you are a constituent.
John Reagan, Chairman
Nancy Stiles, Vice Chairman
Update 4/4/16: SB 503 will go before the House Education Committee on April 5th at 10:00am. Please contact them at HouseEducationCommittee@leg.state.nh.us. The public may email them anytime before they exec this bill to make a difference.
SB 503 is similar to the 2015 bill, SB 69, but takes it a major step further. Instead of a study commission like last year, the current bill would create a commission empowered to implement a preschool program funded through “pay for success” or social impact bonds (SIBs). The concept is that private investors will fund social reform projects and bear the risk if they fail to meet promised objectives. This new kind of funding for social policy change has not demonstrated success to date.
The first program of this type in the United States was a New York City effort in 2012 to help teenage inmates. They set up a large-scale group therapy program to help these teens with moral reasoning. Their goal was to reduce recidivism and they planned to work with over 9,200 youth. The program used “moral reconation therapy” which had success in smaller programs, but was previously untried at this scale. However the program came to an abrupt halt in August 2015. Like other social impact bonds, the program was privately financed and investors would only be paid back if the goals were reached. Unfortunately, this program never had clearly defined objectives and had no impact on the recidivism rate at all. The primary investor, Goldman Sachs, shut down the program a year early. This was the first SIB program and it was a clear failure.
Currently Utah has a “pay for success” early education program in place, but they, too, have not had the success they initially claimed. Like the NYC program, this early childhood program was also financed through social impact bonds. Unfortunately it was plagued with similar problems of poorly defined goals for determining success. But it is more complicated than a bad metric.
In the case of Utah’s SIB program, they had difficulty identifying low-income youngsters who would likely need special education without preschool; their screening process, a picture and vocabulary test called PPVT, is not a commonly used test to determine special education services. This fundamentally flawed the program.
Like SB 503’s proposal, they also had two objectives: 1) reduce the demand for special education services and those associated costs, and 2) improved educational outcomes. These double goals made it particularly complicated to determine success of the program. The presumption that these goals were correlated was not based on previous research and did not have sufficient evidence to support its use in the success metric.
“Brenda Van Gorder, director of preschool services at the local school district, said she was happy with the program because it had induced Goldman to pay for a program that the state would not have otherwise supported. But she and the researcher who tested the local children, Mark Innocenti, acknowledged that they lacked certain basic data on what would have been expected to have happened to the students without the Goldman-funded preschool, and the difference in the performance of the students in the program versus other similar students who did not attend preschool.”
Ellen S. Peisner-Feinberg, a senior scientist at the Frank Porter Graham Child Development Institute said that “You have to be sure you have very rigorous ways of measuring the impact to make sure that it’s legitimate in terms of the outcome you get. That didn’t happen here.”
The Utah program has numerous critics, including Diane Ravitch, an educational policy analysts and former US Assistant Secretary of Education. In her November 10, 2015 article she said, “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.”
In the October 17, 2014 edition of Non-Profit Quarterly they refer to the general success of social impact bonds as “nonexistent.” This article further says,
“Whatever the specific SIB structure, government is always on the hook to pay for “successful” SIBs, in that the government take-out for the project having reached predetermined goals is key—except that it involves government take-out plus a solid return on investment. It means that government has to appropriate in advance the funds that will pay the investors the costs of their working capital plus their anticipated rate of return, else investors might wonder whether a future legislative body might actually appropriate the funds promised by a previous legislature.”
“The public hears about private capital investment, senses governmental dysfunction as of late, and quickly finds the Social Impact Bond concept alluring even while few people know what it really is or whether it will truly save money. Voters might be surprised to learn that government has to be prepared to pay—and pay handsomely in some cases—for having allowed private investors to invest money in projects and concepts that are already well known to work.”
These “pay for success” or social impact bonds (SIBs), are not proven to justify a launch in New Hampshire.
To complicate SB 503’s proposal even more, early childhood education programs have been in existence for decades and analysis shows them to be tremendous failures.
The federal program, Head Start, is the prime example of good intentions that don’t materialize. In 2012 the federal department of Health and Human Services (HHS) released a study that condemns the four-decade $200 billion experiment as a massive failure. HHS hid the report for years and released it just prior to the holidays in an attempt to bury the results. Like the HHS study, multiple others show that Head Start does not have lasting benefits to young students and fizzle out by first to third grade.
There are two studies that are often quoted with positive results for preschool programs. One is the Perry Preschool Project of 1962-1967. It’s important to note that in today’s dollars the cost would be $20,000 per child. The other well-known program from the 1970s is the Abecedarian Project that would be $90,000 per student in present-day money. These are not realistic programs for any family. Also, both projects included fewer than 60 children in each. It is also critical to recognize that these efforts would have significant scaling problems if ramped up to a statewide model.
While we recognize the noble goals of early childhood programs and want to help each child succeed, SB 503 is not the way to make it happen. Urge the Senate Education Committee to give this bill an Inexpedient to Legislate (ITL) recommendation.
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