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Can Social Impact Bonds Help Schools?

Social impact bonds are the latest vehicle for corporate involvement in public schools ("Success Metrics Questioned in School Program Funded by Goldman," The New York Times, Nov. 3).  Goldman Sachs claimed that 109 at-risk children in a Utah preschool program were able to avoid special education because of its investment.  

This new kind of public-private partnership is billed as a symbiotic relationship.  If the education program achieves its stipulated goals, Goldman gets back its money and a guarantee of at least five percent interest. The school district then avoids having to ask the federal government and the state for money to provide special education services for these children when they enter kindergarten.

What I don't understand is why Utah would agree to pay five percent minimum when it could borrow money through the bond market at a lower rate.  Then there is the question of the methodology used to measure success.  The goal was to determine whether the investment helped young children avoid special education. Past studies have reported a typical reduction rate between 10 and 20 percent. At most, they have reported reductions of 50 percent.  Goldman and the district reported that almost 99 percent avoided special education.

That's why I remain highly skeptical about the Utah program.  It sounds too good to be true.  It could very well be that many of the children would not have needed special education in the first place. Therefore, the success rate claimed is suspicious.  I have nothing at all against new ideas emanating from the private sector.  But I remember when Chris Whittle claimed in 1992 that he could deliver a first-rate education to students and make a profit in the process with his Edison Schools.  He predicted that Edison would be managing 1,000 schools with one million students by 2010.  He never delivered on his promise.  In 2008, Whittle finally threw in the towel.

I don't think that providing a quality education and making a substantial profit are compatible. Claims to the contrary have almost always turned out to be a mirage.

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