Using Social-Impact Borrowing to Expand Preschool-to-Third Grade Programs in Urban Schools

Budget constraints and difficulty raising taxes limit school districts from expanding education programming, even when research shows that additional expenditures would generate economic benefits that are greater than costs. Recently, coalitions of private investors, philanthropists, education practitioners, and government finance analysts have emerged to create opportunities to expand education services that promise high rates of social net benefits without raising taxes or reducing other expenditures. These collaborators have a strong interest in obtaining careful estimates of educational program effectiveness. We describe the use of social-impact borrowing to increase access to the Child-Parent Center preschool-to-third grade intervention for at-risk students in the Chicago Public School District. The partners include the city, school district, investors, nonprofit organizations, and a university. The key to the feasibility of social-impact borrowing is the ability to document that early intervention can reduce the need for later special-education services. With the help of private investors and nonprofit organizations, it is possible for public school districts to finance services with funds from private sources and use future cost savings to repay this debt. We discuss how social-impact borrowing is being used in Chicago and in Salt Lake County as the nation's first 2 instances of using pay-for-performance social-impact borrowing to support early education.