Panel Paper:
Pay for Success in Education: Private Investments in Public Preschools
*Names in bold indicate Presenter
To generate the second wave of these Pay-for-Success social impact financing initiatives, the U.S. Department of Education recently awarded 7 state or local governments feasibility grants to start making plans to create additional opportunities for private investments in preschool programs. This paper uses the 7 funded feasibility grant proposals as data in an assessment and critique of state and local government plans to seek private funding of public preschools. This paper will discuss the movement away from promising payments to private investors based on realized public cost savings to a trend toward promising payments to private investors for “desirable” education outcomes such as higher test scores. As these social impact initiatives expand across the U.S, relaxing the assumption that realized cost savings will provide the funds needed to pay back investors is problematic. I discuss the additional issues involved in terms of appropriation and political risks and the suggestion is made that these changes (to pay for desirable outcomes rather than for outcomes that generate cost savings) ultimately will end up limiting the attractiveness of these social impact initiatives. This paper also is highly consistent with the conference theme on the importance of better measurement for better public sector decisions.