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'Pay for Success' Funding Model Focus of Policy Toolkit

"Pay for Success" financing models—a shorthand term for private investment in public programs with the prospect of financial returns—has been embraced on both sides of the political aisle (including a boost in the Every Student Succeeds Act.)

The idea behind pay for success is that a private entity pays for programs such as preschool or home visiting programs, shifting the financial burden from public entities. That private investor then receives money back if the program achieves concrete and measurable results. A pay for success financing mechanism is already paying for preschool in the 67,000-student Granite district in Utah, with the goal of decreasing future special education enrollment. Several other states and cities are looking at pay for success financing models to fund prekindergarten or home visiting programs. 

But as policymakers start to embrace these funding models for early childhood education, how should they make sure they're investing in quality programs? What are the appropriate results to measure, and how should the programs be evaluated? 

The Washington-based Urban Institute released a pay for success toolkit Wednesday to help answer those questions. 

Pay for Success Model Requires Attention to Multiple Elements

The toolkit stipulates that high-quality early-childhood education can have meaningful positive effects for children. But those considering a pay for success model must be prepared for hard conversations about data, measurement, how to fund repayment to investors, program quality, and rigorous evaluation. 

And also important is realizing that pay for success is only one of many approaches to paying for public programs, said Justin Milner, the director of the institute's Pay for Success Initiative and Evidence-Based Policymaking Collaborative. 

"Pay for success is not the answer to all problems," Milner said in an interview. "But it can be an useful mechanism for bringing a broader set of stakeholders to the table."

Measuring the effectiveness of early-childhood programs presents a unique challenges compared to other programs. Many prekindergarten programs have shown positive effects for children once they enter school, but some studies have shown those effects don't always last much beyond 3rd grade. In  the Granite district, critics have said that the metrics used to evaluate the prekindergarten program have overstated its effectiveness.  

The toolkit suggests that policymakers may consider having multiple measures, including some that can be tracked in the intermediate term—kindergarten readiness, for example—and others that are longer-term goals, such as  improvement in 3rd grade literacy.

Pay for Success and Focusing on Results

Ultimately, pay for success forces jurisdictions to answer questions about focusing their resources on areas that get results, he said. And sometimes, funders do walk away. The nation's first pay-for-success program attempted to improve outcomes for incarcerated adolescents in Rikers Island in New York. For a variety of reasons, that program failed, and funders withdrew. 

No one would want to see the same result for an early-childhood intervention, which is why policy makers and investors need to focus on quality and effectiveness from the start.

"For those of us who believe in the importance of social interventions to help people, it really does put the onus on ultimately the providers and programs to demonstrate that something was effective," Milner said. 


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