County of Salt Lake
Social Impact Bonds
Granite School District in Utah expanded its preschool program for three and four-year-old children through a Social Impact Bond (Pay for Success model) financed by Goldman Sachs ($4.6 million) and the J.B. Pritzker Foundation ($2.4 million). Research in the school district showed trends that children who attended Utah’s high quality preschool were less likely to need special education in elementary school.
The United Way of Salt Lake oversaw the Preschool Project in the Granite and Park City School Districts and was responsible for managing repayments to the investors. Students who attend the preschool program will be followed through the sixth grade. This program ran from 2013-2018.
In 2014, due to the program’s proven success, the Utah Legislature decided to take over funding this program and in 2018, the social impact bond ended after a successful five-year run in which 4000 preschoolers were served in this time period.
total preschoolers served in the five year time period
upfront capital provided by Goldman Sachs and the J.B. Pritzker Foundation (in millions)
Challenge
Engaging Local & State Policymakers in Complicated Financing Structure
With Wall Street involvement, gaining agreement from a legislature to enable private investors to partner with the state and local school districts was complicated.
Getting to Action
Voices for Utah Children began paving the way for a social impact financing project. Investors would be paid over a period of time, as children who otherwise might have been placed in special education were not. Janis Dubno, a Policy Analyst at Voices for Utah Children at the time, reviewed the longitudinal data. Her background as a financial analyst enabled her to understand the promise of preschool and the potential return on investment. The data led to a feasibility study, and she began talking to investors at Goldman Sachs about a potential social impact financing project. e data and feasibility study were critical to attract private investors for a “pay for success” project.
| 2010 | Voices for Utah Children, the Granite School District and United Way of Salt Lake identified a potential social impact financing project. |
| June 2013 | Goldman Sachs and J.B. Pritzker announced loans to be distributed through the United Way of Salt Lake. |
| July 16, 2013 | The Salt Lake County Council approved $350,000 to assist with “success payments.” |
| Fall 2013 | Preschool slots offered to an additional 600 children. |
| April 2014 | State legislature approved HB96, enabling private investors to partner with the state in preschool initiatives. |
| 2014 | Due to program's proven success, the Utah Legislature decided to take over funding this program after its five-year run ended. |
| Spring 2016 | State legislature passed SB101, an expansion of HB96, which allocated funds to increase access to existing high-quality preschool programs and create a preschool scholarship fund for children experiencing intergenerational poverty. |
| 2018 | Funding for this program ends and is taken over by the state legislature. |
Results
In September of 2013, the Utah High Quality Preschool Program began delivering an evidence-based curriculum to increase school readiness among three and four-year old children. As a result of entering kindergarten better prepared, it is expected that fewer children will use special education and remedial services in kindergarten through 12th grade, which will result in cost savings for school districts, the State of Utah and other government entities. Private capital from Goldman Sachs and J.B.Pritzker is financing an expansion of the Utah High Quality Preschool Program to provide early education services to up to five cohorts totaling over 3,500 children. The initiative will follow four cohorts of children for 12 years.
In 2015, investors received their first payout. Of the 595 new students, researchers estimated that without preschool, 110 students would have been likely to use special education in grade school. Students were identified through a predictive standardized test. Of those 110 students, only one used special education services in kindergarten. All 110 students will be monitored through sixth grade. (Note: is prediction has been called into question with some experts saying it was too high.)
In 2018, the social impact bond ended, with the Utah Legislature taking over, having seen the overall success of the program.
Keys to Success
Learn More
- Interview with Salt Lake United Way, Voices for Utah Children, Goldman Sachs, J.B. and M.K. Pritzker Family Foundation, and Hanover Investment Group: Pay for Success in Salt Lake City Pre-K Project (December 2013)
- Financing Human Capital Development for Economically Disadvantaged Students (Janis Dubno, Voices for Utah Children- Slides)
- Granite Preschool Video