Eleanor Clift asks Can This Save Early Childhood Education? in an article in the Daily Beast discussing social impact bonds for funding early education programs. The article discusses innovative approaches in a white paper released on Capitol Hill recently.

“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 and the Pritzker Family Foundation are the major investors in a preschool project with the Chicago Public Schools. The private funds will absorb the first losses if the project fails to meet expectations. The investors would recoup its money based on money saved by the Chicago school system if  outcomes are positive: more kids are ready for kindergarten, fewer kids are slotted into Special Ed, and if literacy scores are maintained into third grade.

Wisconsin state policymakers have recently been discussing about investing in programs with a payback down the line.  Social impact bonds is a hot new way to test returns on investment, but it is will probably take time for efforts to be successful enough for social impact bonds to be accepted widely.

Dave Edie