Researchers Question Success of Utah Social-Impact Bond

A Utah preschool program funded by investment bank Goldman Sachs that was touted last month as the first “social-impact bond” to yield returns for an investor may have significantly overstated the results on which the payout is based, according to The New York Times.

Social-impact bonds leverage private funding for social programs, with governments paying investors if the efforts achieve measurable results. Goldman received $260,000 from Utah when the program it paid for was credited with keeping 109 “at-risk” kindergartners out of special education — 99 percent of the students whom school officials believed, based on testing, would need costly special services.

Early-education experts consulted by the Times questioned the success rate, saying that better-funded preschool programs have been found to cut special-education rates by 50 percent at best and that most efforts produce a reduction rate of 10 to 20 percent. They said the Utah program’s rate was predicated on faulty assumptions of how many of the children would have needed special education without preschool.

Clive Belfield, an economics professor at New York’s Queens College who studies early education, said Goldman “either performed a miracle, or these kids weren’t in line for special education in the first place.” Brenda Van Gorder, head of preschool services for the district involved in the program, acknowledged that officials lacked some basic data on the children’s likely course without preschool but said she was happy with the bond because it induced the Wall Street bank to fund a program the state would not have otherwise supported.