CURMUDGUCATION: USED, Pay for Success and Stupid Pre-K Plans

CURMUDGUCATION: USED, Pay for Success and Stupid Pre-K Plans:

USED, Pay for Success and Stupid Pre-K Plans

The United States Department of (Privatizing) education is touting another boneheaded idea, this time aimed at preschool and using yet one more unproven approach-- pay for success.

What is that, exactly? Here's the explanation from the USED FAQ page:

Pay for success (PFS) is an innovative contracting and financing model that aims to test and advance promising and proven interventions while paying only for successful outcomes or impacts for families, individuals, and communities. Through a PFS project, a government (or other) entity enters into a contract with an Investor to pay for the achievement of concrete, measurable outcomes for specific people or communities. Service providers deliver interventions to achieve these outcomes. Payments, known as Outcomes Payments, are made only if the intervention achieves those outcomes agreed upon in advance. The government (or other) entity makes Outcomes Payments to repay Investors for the costs of services (and sometimes other projects costs) plus a modest return. Ideally, Outcomes Payments amount to a fraction of the short- and long-term cost savings to the government (or other) entity resulting from the successful outcomes.  

Pay for Success is the zippier nom de guerre of Social Impact Bonds. If you want my "for dummies" explanation, you can look here. If you want a grown-up's fully detailed explanation, complete with sad history, I recommend this piece by Tim Scott.

The basic idea is this. The government gets an investor to foot the bill for what's supposed to be a government program. Then if the task is completed successfully for less than the government had set aside to do the task, the government reimburses the investor for the program costs and as a bonus, the taxpayers' "savings" are magically transformed into the private investor's "earnings." It is this big time version of telling the babysitter, "Here's ten bucks to get supper. You can keep whatever change there is."

Let me rattle off just a quick list of why this is a dumb way to do business in the-- well, it's actually a dumb way to do just about any sort of business, but let's stick to why it's a dumb way to do business in the education sector.

1) It literally sets the interests of the contractor against the interests of the children. Every dollar that the contractor spends on children is a dollar the contractor doesn't get to keep.

2) It builds a system around doing the absolute least we can get away with. "Spend the least you can get away with," say Social Impact Bonds, "to get the lowest acceptable results." Nobody tells their CURMUDGUCATION: USED, Pay for Success and Stupid Pre-K Plans: