Show me the money

Innovative finance model could provide new path for early childhood services

It was the fall of 2010, and the finance task force of the Early Childhood Council of Boulder County had worked for the better part of the year to come up with the dollar amount needed to provide high-quality early childhood services to every child in the county.

But after the task force finally nailed down the number, they never released it publicly.

“The number was so big, they were afraid it would terrify the community,” said Bobbie Watson, executive director of the council.

With the recession hitting, the board knew better than to ask voters for a tax increase, much less one capable generating the many millions of dollars the task force anticipated was needed.

Fast forward to November 2013 and the ballot box defeat of the school finance measure Amendment 66, which would have made possible universal full-day kindergarten and thousands more preschool slots for at-risk children. With that funding opportunity gone, Watson and her board quickly decided to pursue an innovative financing model they’d begun to explore.

Called “Pay For Success,” or PFS, it had bubbled up in policy circles for a few years, but is largely untested.

The idea behind the model, which is also sometimes called “Social Impact Bonds” or “Results-Based Financing,” is that private investors—commercial banks or foundations–pay upfront for evidence-based programs, such as high-quality preschool.

In turn, the programs prevent costly interventions such as grade retention or the use of special education services during the child’s K-12 career. If the school district or state realize the expected savings from reduced special education or grade retention costs, the investor is repaid with interest. Thereafter, the district or state reaps any additional savings.

While there are no active Pay For Success programs in Colorado, the concept is gaining traction. The city of Denver and the state now share a fellow from Harvard University’s Social Impact Bond Technical Assistance Lab whose job is to evaluate possible PFS projects. In addition, the Rose Community Foundation has convened a group of about 20 Colorado foundations for ongoing discussions about how they might facilitate or fund Pay For Success projects in early childhood.

Watson, who with her board has hired consultants to lead the Pay For Success planning process, said, ““We’re not talking about this. We’re doing this…This is the only option we see on the horizon that will bring millions of dollars into the birth-to-five space.”

Skepticism, then excitement

If Pay for Success were a child, it would still be in preschool. It was launched first in England in 2010 with a program aimed at reducing recidivism—and thus the high cost of prison stays–by helping freed inmates transition back into their communities

While there are a number of Pay For Success programs in the works around the world, fewer than 10 are actively running. Just one of those—in Utah’s Salt Lake County—focuses on early childhood. In New York, projects focus on adult and juvenile recidivism and in Massachusetts they address recidivism and chronic homelessness. A health care-based program launched last year in Fresno, Calif., aims to cut emergency room visits by low-income children with asthma. None of the programs have reached the pay-out phase yet.

Mary Wickersham, who is one of the consultants working for the Early Childhood Council of Boulder County, said a state senator first proposed a PFS-like concept to her in 2008 when she worked in the state treasurer’s office.

“At the time, I was extremely dismissive,” she said. “It just seemed horribly impossible to me.”

But proponents of the idea, including U.S. Rep. Jared Polis, a Democrat who formerly served on the State Board of Education, kept talking about it and policy-makers, foundations executives and law-makers started listening. Wickersham, director of the Center for Education Policy Analysis at the University of Colorado Denver, is now part of several efforts to move Pay For Success forward in Colorado.

“It’s been an idea that’s really exploded over a short period of time,” said Wickersham.

Part of the appeal of PFS in the early childhood realm is that there’s already a large body of evidence demonstrating the positive outcomes that stem from effective early childhood programs. Because those positive outcomes — from improved school performance to lower unemployment — help save the government money, the idea of staking a claim on those future savings to expand programs now seems to make sense. In fact, many in the early childhood community believe PFS has the potentional to address what they see as chronic underfunding of important early childhood programs.

“In early childhood, [the lack of funding is] even worse than the K-12 education system, if that’s even possible,” said Elsa Holguin, the senior program officer at the Rose Community Foundation who’s leading the coalition of foundations interested in PFS.

Aside from federal child care subsidies and targeted programs like the Colorado Preschool Program, “there’s not a really robust financing mechanism for comprehensive early childhood programs,” said Karen Rahn, director of the Boulder County Department of Human Services.

She believes PFS is a promising finance tool as well as “a way of bringing stakeholders together around an issue.”

Nuts and bolts

Pay For Success deals are complicated transactions that may involve eight or more partner organizations, including investors, government entities, service providers, account managers, evaluators, and an “intermediary” whose job is to recruit investors and manage the overall program. Such projects also require extensive planning and number-crunching to determine the target population and intervention that will provide the savings needed to make the concept successful.

In a hypothetical example, an investor pays a school district to create 500 new preschool slots for low-income children in the hopes of preventing the students from repeating third grade. The contract would establish  specific performance targets that would need to be achieved for that cohort at the end of third grade, or approximately five years after the start of the PFS project. If the outcomes do not materialize, the school district would not have to pay back the investors.

Under Utah’s PFS deal, launched last summer, private investors will provide up to $7 million to pay for thousands of new preschool slots for low-income three- and four-year-olds over the next several years. The program is based on data that shows children who attend high-quality preschool are less likely to be identified for costly special education services once they start elementary school. Because children rarely discontinue special education once they are found eligible, reducing their chances of needing services can yield a huge cost savings over the course of a 13-year school career.

Janis Dubno, a Wall Street banker-turned-children’s advocate, started some of the early work on what’s called “The Utah High Quality Preschool Program” in 2010 and said the process required much collaboration among partners. Among them were  two school districts, the local United Way, a local community foundation, Salt Lake County, a children’s advocacy organization, an investment firm and two private investors—the bank Goldman Sachs and Chicago philanthropist J.B. Pritzker.

“We were all aligned with what we wanted to achieve,” she said.

Even so, there were stumbling blocks. Legislation that would have enabled Utah’s state government to participate in the deal failed last year and leaders of the PFS effort had to settle for a one-year “proof of concept” approach under which the United Way and Salt Lake County contributed to a repayment fund instead of the state.

“A lot of people in the legislature couldn’t get their heads around this financing mechanism,” said Dubno, a senior policy analyst for the advocacy organization Voices for Utah’s Children. “There was a lot of convincing to do.”

Those efforts paid off this year with the passage of the enabling legislation. It was signed into law on Tuesday.

Movement in Colorado

In Boulder County, the early childhood council will work with its consultants over the next year to determine what type of PFS pilot would work best there. It could be an expansion of an existing preschool program, a home visiting program for families with young children, or something else, said Watson.

“It’s investing in our current capacity and just expanding the bandwidth,” she said.

Boulder County isn’t the only one considering Pay For Success right now. A number of other organizations also crafted PFS proposals last fall in response to a “Request For Information” by the state. All told, 43 proposals came in, with 12 of those focused on early childhood , 14 on disconnected youth,  five on homelessness, four on health and even one on forestry.

Among the early childhood respondents were big players like Mile High Montessori and Clayton Early Learning as well as smaller organizations like the two-employee Adams County Youth Initiative. Tyler Jaeckel, the PFS staff member shared by the City of Denver and the state, said the next step in the process is determining the feasibility of the proposals and building the partnerships that would be required to launch them.

One promising proposal came from the Merage Foundations, which proposed an expansion of an existing program called “Early Learning Ventures” that helps small, independent child care providers band together in “alliances” to achieve economies of scale when it comes to business and administrative functions. Sue Renner, the foundations’ executive director, said the program already shows a return of $8 for every $1 invested, has cut state costs for processes like licensing, and has given providers more time and money for quality improvements.

“We know we’re on to something,” she said. “How do we make sure we can scale this and do more of this work?”

While Merage, Boulder’s Early Childhood Council and other interested parties will have to spend months more on data collection and analysis before launching Pay For Success in the state, some observers believe it won’t be a theoretical discussion for much longer.

“It’s in the early stage, but this is going to move fast,” said Holguin. “My goal is let’s position Colorado…to be part of this national wave.”

Not without challenges

While PFS has an enthusiastic cadre of supporters, it has its skeptics too. Some worry that it could represent the privatization of social programs. Others wonder about the intentions of corporate banks that might serve as investors and question whether they should be making a profit off social programs.

Jaeckel said the privatization concern isn’t warranted because PFS money funds non-profit providers or government entities that are already providing services. As for concerns about corporate motives, he noted that commercial investors may care about the social good and see investments in early childhood PFS projects as a way to ensure a quality work force down the road. In Colorado, he added, key PFS investors are more likely to be foundations than Goldman Sachs-type companies.

While investors do earn interest through PFS deals–if the desired outcomes are achieved– the rates are not particularly lucrative. Typically, foundation investors might only get a return of around 2 percent and commercial investors might only get a risk-adjusted rate of around 4 percent, said Jaeckel.

Besides concerns about corporate profits, advocates of PFS initiatives may also have to grapple with the same public perception problems that have sometimes derailed early childhood proposals seeking funding through traditional means.

Pamela Harris, president and CEO of Mile High Montessori in Denver, said, “There’s…this cultural piece that the majority of people think kids should be at home with their moms.”

On top of that is the challenge of getting the public, which may be familiar with K-12 per-pupil costs of around $6,600 a year, comfortable with the higher price tags that often accompany early childhood programs. For example, Harris said, a comprehensive, high quality preschool program can run $9,500-$15,000 a year.

“The cost of quality early education is really high and…that’s been shocking for people.”

recruitment and retention

School districts counting on public support for higher teacher pay to pass new tax increases

Teacher Christina Hafler and her two-year-old daughter Emma join hundreds of other educators at a rally outside the State Capitol to call for increased eduction funding on April 16, 2018 in Denver, Colorado. (Photo by RJ Sangosti/The Denver Post)

Most school districts asking voters to approve local tax increases for schools this November have one thing in common: They are promising that money will go to raise teacher pay.

Polls show voters are inclined to support increasing teacher pay this year, following several high-profile walkouts across the country where teachers shared their struggles with working multiple jobs, and paying out of their own pocket to outfit their classrooms or help feed hungry students.

“Right now you got a pretty clear majority of people saying, teachers deserve more,” said Keith Frederick, who conducts polls for school districts and other government bodies to determine if they should put requests on the ballot. “Voters are very interested, these days anyway, they’re interested in their community schools, higher teacher pay.”

Many officials from those districts say the pay they offer simply isn’t keeping up with nearby districts, meaning a harder time recruiting and retaining teachers. Salaries and employee benefits take up the largest chunk of school district budgets.

School districts in Aurora, Jeffco, Westminster, Douglas County and Sheridan are among the districts making a local request this November. Ballots have been mailed out this week, and voters will start to decide if the request is worth a local tax increase.

Statewide, teacher pay in Colorado ranks below national average.

But measuring how competitive teacher compensation actually is among districts can be complicated. Surveys and studies show that salaries alone do not account for what keeps teachers in their job or what makes them leave. And how teachers get paid in some districts is complicated, based sometimes on their evaluations, or performance of their students, or school, or the difficulty in filling the job they’re in.

Then there are other work conditions that can be considered benefits. The school district based in Brighton moved this year to a four-day school week after failing to pass several tax measures. Although the change will only result in small savings, the district claims it’s a new way to attract teachers without having to raise pay.

But looking at state data for last year, most districts that have the highest starting salaries or average pay for teachers, including Cherry Creek, Boulder, and Poudre, also have the lowest teacher turnover.

Average teacher pay and teacher turnover rates

 

DISTRICT Average Pay Percent Teacher Turnover
Thompson $49,572 16.8 %
Poudre $54,140 9.7 %
Douglas County $53,080 13.4 %
Elizabeth $40,471 23.2 %
Littleton $66,399 9.5 %
Aurora $54,742 26.2%
Cherry Creek $71,711 10.1 %
Sheridan $49,535 35.9 %
Denver $50,757 20.3 %
Jeffco $57,154 14 %
Westminster $58,976 19.1 %
Adams 12 $59,511 12.8 %
Boulder $75,220 10.33 %
Pueblo 60 $47,617 18.3 %
Pueblo 70 $49,328 13.6 %

*Source: Colorado Department of Education. Districts in bold have a tax request tied to teacher pay on this November’s ballot.

None of those three districts are requesting local tax increases this year, but their neighboring districts, including in Douglas County, Elizabeth, Jeffco and Thompson, are.

The contrasts between districts can be large. In the neighboring Poudre and Thompson districts, the difference in the average pay is about $5,000, and the difference in starting salaries is even larger. Higher-paying Poudre has a teacher turnover rate of less than 10 percent. In lower-paying Thompson, the turnover rate is about 17 percent.

The Thompson district is requesting a $13.8 million mill levy override to raise teacher pay, and to purchase new books and technology. The district is also requesting a $149 million bond for building maintenance, security improvements and a new school.

Some of the districts requesting tax increases this year have failed to win voter approval before, including Thompson, Westminster and Jeffco. Although several factors including the political culture of the districts influence the vote, highlighting what voters value — like boosting teacher salaries — might improve the chances of voter approval.

Although most of the local tax measures don’t face organized opposition, criticism of a statewide tax measure for schools might impact other questions down the ballot. Critics of the statewide school measure have said that districts are not under obligation to use the money to pay teachers more, and worry that new money could go into administrative costs instead.

Some districts are trying to create assurances for voters.

Aurora Public Schools agreed to language in its contract with the teachers union that requires the district to set aside at least $10 million from new mill levy revenue, if approved, to give teachers a 3 percent raise starting in January. Remaining money would go into creating a new teacher salary schedule.

The Jeffco school board passed a resolution that commits a certain percentage of new tax revenue for teacher pay. The tax measure also includes language prohibiting use of that revenue for administrative budgets.

Even if districts do use the money for increasing salaries, most districts likely have to negotiate with their employee unions to decide just how to do it — whether it’s raising base salary, giving across-the-board raises, or creating new systems that reward certain teachers.

Several school boards across the state also passed resolutions committing to certain items that would get funding first if voters approve the state ballot request for new school funding. One common, top priority among those is improving salaries.

Denver’s school leaders said they would use the largest portion of the proposed new state revenue for teacher salaries. Negotiations there have been heated, as district leaders insist the state measure needs to pass in order for the district to come closer to meeting the union’s demands.

School Finance

School health clinics could take a hit under rule to restrict green cards for immigrants who receive public aid

PHOTO: Christina Veiga

One student stands out in Dr. Viju Jacob’s mind when he thinks about all the patients he’s seen in his 15 years at school-based health clinics: a Central American immigrant enrolled at a Bronx high school in 2012.

The student did not have insurance, which Jacob said is common for new immigrants, but the clinic offers free care regardless of a student’s immigration or insurance status. That’s thanks to Medicaid funding from other students’ claims.

Over the next four years, the student returned to the clinic, located in his school, when he needed a physical or simple treatment. But it wasn’t just his physical health that improved.

“He got a lot of soft emotional support,” Jacob said. “Coming to us, having people who spoke his language or his native language to sort of encourage him, help him with filling out forms.”

Jacob and immigrant advocates worry students like this may not get the support they need under a new federal proposal that would make it tougher for immigrants to successfully seek green cards if they rely on public benefits.

“Especially in New York City and in the New York City public school system, a large portion of the student population in some shape or form is on Medicaid or Medicaid managed care,” Jacob said. “That is such a large pool that could be affected if this rule gets implemented.”

To receive a green card, immigrants currently have to prove they won’t be a burden on the government, so officials already consider the cash benefits that they receive when reviewing applications. But now, for the first time, the Department of Homeland Security wants to expand the rule so that green cards can be denied to immigrants who rely on benefits such as  non-emergency Medicaid, Medicare Part D, food stamps or forms of housing assistance.

Researchers and immigration advocates believe that even though a final decision on the proposal is months away, news of this rule could persuade large swaths of immigrants to halt their public benefits, out of fear it will affect their ability to become permanent U.S. residents. In a recent analysis, the city estimated that 75,000 New York City immigrants may have to choose between benefits and a green card.

And fewer Medicaid enrollees means fewer dollars rolling into clinics that serve at least 387 schools across the system, since they operate through partnerships with healthcare providers and depend, in part, on Medicaid funding that students may claim. It’s too early to tell the exact impact, but advocates, analysts, and even the federal government have acknowledged that the rule change could result in loss of funding.

“It’s bad enough for the families, and it’s even worse for us because we rely heavily on that funding stream,” said Jacob.

Clinics were a big part of Mayor Bill de Blasio’s first-term education agenda, which involved providing more schools with wrap-around services.

“Taking away services that keep children well-fed and healthy is wrong,” said Jaclyn Rothenberg, a spokeswoman for de Blasio, in a statement to Chalkbeat. “We’ll continue to ensure that our children, regardless of their and their family’s immigration status, have the resources they need to succeed in and out of the classroom.”

It’s not clear how many children are enrolled in the school-based clinics or how many, on average, use them. The city’s Department of Education didn’t respond to requests for comment about the rule change, including what portion of Medicaid funds buoy school health clinics, which are run by medical centers, local hospitals and community organizations. 

According to Jacob, who is also board chairman of New York School Based Health Alliance, it’s typical for clinics to receive between two-thirds to half of their funding from Medicaid. The rule is expected to threaten the livelihood of similar clinics in other states, such as Colorado.

If enough people pull out of Medicaid, clinics could seek specific grant funding instead, Jacob said.

This is the latest immigration issue that New York City’s top education officials have had to grapple with. In the past, they’ve been quick to respond, such as reassuring families that their information is safe with the school system. Last year, a school in Queens turned federal immigration agents away after they showed up and asked about a fourth-grader. (U.S. Citizenship and Immigration Services said it was an administrative inquiry.)

Last March, the school system updated guidance for principals on immigration issues, stating that only local law enforcement can enter a school unless without a warrant or unless imminent harm is expected.

The Department of Homeland Security touts its proposal by saying its primary benefit would “help ensure that aliens who apply for admission to the United States, seek extension of stay or change of status, or apply for adjustment of status are self-sufficient, i.e., do not depend on public resources to meet their needs but rather rely on their own capabilities and the resources of their family, sponsor, and private organizations.”

The rule change wouldn’t include free and reduced-price lunch, which is universal in New York City. The rule also wouldn’t apply to families making less than 15 percent of the federal poverty level, refugees, asylum-seekers, legal immigrants in the military or immigrants who receive assistance after natural disasters.

Still, the Kaiser Family Foundation estimates that a “chilling effect” could even dissuade people who are enrolled in the Children’s Health Insurance Program, which is not included in the proposal, from continuing to receive the benefit. Other analyses come to a similar conclusion, including a June report from by the Migrant Policy Institute.

“In theory people should understand that they don’t need to disenroll their child from benefits because that’s not going to affect them,” said Mike Greenberg, senior fellow at the Migration Policy Institute, which did an analysis of the “chilling effect” this rule could have. “In practice it may still have that effect because this is very complicated, and we’re operating in an environment of so much fear and uncertainty.”

Beyond clinics losing funding, immigrant parents might be too scared to let their children go to an in-school clinic. Advocates said there is a fear among immigrants over what information government institutions are collecting and how it could be used against them.

Christina Samuels, manager of education policy at the New York Immigration Coalition, said her organization has raised these concerns with the education department, which has said it would protect families’ information. School health clinics don’t ask about immigration status.

In Jacob’s experience, students of different ages use the school health clinics for different reasons. Elementary-school students tend to show up because their parents’ work hours are at odds with doctors’ appointment times, and they can’t afford to take a day off. Those children may have an injury looked at, receive treatment for a stomach ache, or get an immunization.

Middle-schoolers usually get their shots or physicals, and some start to ask about reproductive health. And in high school, students receive a number of services, and preventative and emergency contraception may be addressed.

Outside organizations help staff counselors and social workers at some city schools, which staffers say are already stretched thin. Those, too, could also see more demand as students lose reliable access to food and healthcare, Samuels said.

She also pointed to the mental stress on immigrant students digesting another immigrant-related proposal out of Washington, such as  the proposed ban on travelers from certain Muslim countries.

“Now we’re getting into a period where we’re really concerned about the mental health and behavioral health of students,” Samuels said.

City Hall officials have blasted the proposed rule, but have also cautioned that no changes have gone into effect. In a recent press conference, De Blasio said President Donald Trump is trying to “hurt the very people who are contributing to our economy and our future. It makes no sense and we are going to fight it.”

Last week, the federal government opened a 60-day period that allows public comment on its rule. After that, officials will take another 60 days to make a final decision.