Public-Private Strategies, Including Pay for Success
Private resources and expertise can be leveraged to increase the quality and availability of programs and services provided to children from birth to age five. There are many ways to leverage private resources to support early childhood.
- Hawaii has leveraged private resources with state and federal dollars to fund Learning to Grow. This program provides statewide education outreach to families and license-exempt child care providers to support efforts to enhance children’s early learning, healthy development, and high-quality home-based care.
- Minnesota raised and invested private funding to learn about and plan how to improve its early education system. The project used $20 million in private money to set the foundation for an early learning system.
Pay for success, or social impact bonds, is a relatively new approach to finance that combines funding, program evaluation, and program management. Its goal is to improve social outcomes while more effectively allocating scarce public-sector resources. In one pay-for-success model, the government contracts for a program or initiative to address a societal need. In the start-up mode, philanthropic funders provide the financial resources to pay for the program. In this model, government, service providers, and philanthropic funders agree on targeted outcomes, and independent evaluators monitor program performance.
Funding for a pay-for-success initiative can come from several sources. Should the program achieve the agreed metrics, the government will be able to reimburse the initial funders for their invested capital and reinvest in the program. If the program fails to meet target outcomes, state agencies are not obligated to repay the investors. Under the pay-for-success construct, performance risk is transferred to the private funders. An additional attraction is that these programs often drive fiscal savings along with improved outcomes for the target population.
One compelling element of pay-for-success or social impact bonds is the way they blend some parts of results- or performance-based financing and public-private partnerships. New research on pay for success, or social impact bonds, shows promising practices. Some examples of early childhood programs using the pay-for-success model include the following:
- Utah established a pay-for-success model for early childhood education for children receiving high-quality preschool. Through a partnership led by United Way of Salt Lake in cooperation with Goldman Sachs and others, the Utah High Quality Preschool Program delivers a high-impact, targeted curriculum to increase school readiness and academic performance among three- and four-year-old children in various community and school settings. The partnership makes payments based on reduced special education use.
- The City of Chicago had a $16.9 million social impact bond deal to provide early childhood educational services (prekindergarten) to up to 2,620 children for the 2014–2015 school year, with additional proposed expansion for 2015–2019. The intervention funded by the social impact bond works with both children and their parents through the historic half-day Child-Parent Center (CPC) model. Goldman Sachs’s Social Impact Fund and Northern Trust are serving as the senior lenders, with the J. B. and M. K. Pritzker Family Foundation in a supporting role. The program works with preschool children and their parents to improve educational outcomes, providing children with a positive preschool experience and parents with tools to assist with the learning experience. Along with the proposed intervention goals (readying children for kindergarten, improving third-grade literacy, and reducing the need for special education services), the program has enabled more children to have access to higher-quality preschool experiences.
 Von Glahn, D., & Whistler, C. (2011). Pay for success programs. An introduction. Policy & Practice, June (19–22). Retrieved from https://www.thirdsectorcap.org/wp-content/uploads/2015/01/Pay-for-Success-Programs-June-2011-PP.pdf.
 See footnote 31.
 Gustafsson-Wright, E., Gardiner, S., & Putcha, V. (2015). The potential and limitations of impact bonds: Lessons from the first five years of experience worldwide. Washington, DC: Brookings Institution.
 Goldman Sachs. (2015). Initial results released for first social impact bond for early childhood education show success. Retrieved from https://payforsuccess.org/sites/default/files/resource-files/sibfactsheet10-1-2015finaledits-4_0.pdf.
United Way of Salt Lake. (n.d.). Pay for success: We’re seeing BIG progress! [Web page]. Retrieved from http://www.uw.org/our-work/cradle-to-kindergarten/pay-for-success.html.
Child Care State Systems Specialist Network. (2014). Profiles: Successful public-private partnerships (Utah). Washington, DC: Office of Child Care. Retrieved from https://childcareta.acf.hhs.gov/sites/default/files/utah_profile.pdf.
 Nonprofit Finance Fund. (2014). City of Chicago announces 5th U.S. Pay for Success Program. Retrieved from IFF. (2017). Chicago’s Pay for Success Program Evaluation: Years 1-4. Retrieved from https://iff.org/pfs/.