SALT LAKE CITY — A Utah preschool program that has helped hundreds of severely at-risk 4-year-olds avoid costly special education programs is making waves across the country.
And it didn’t cost taxpayers a penny to pilot the program.
The Utah High Quality Preschool Program, which launched in 2013, uses a new model called “pay for success” in which private investors, mission-based organizations and the government team up to address social issues, such as criminal justice, health care access, graduation rates and youth employment.
In this model, the government doesn’t pay for any social program that isn’t successful. If there isn't a measurable impact, private investors take the financial hit — not taxpayers. If carefully measured data proves that the program was successful, only then does the government pay back investors.
Utah’s program was the second in the nation — and the first addressing early child education — to employ the pay-for-success model, which was first explored in 2011. Now, around 83 pay-for-success programs have launched nationwide amid rising excitement about the model’s potential to cut wasteful government spending while improving the quality of social services delivered.
It also laid the foundation for a piece of federal legislation that Congress passed in February 2018 that set aside $100 million in federal funds for state and local governments to implement pay-for-success programs to address social problems in their communities. Applications for the funds opened Feb. 8.
It's difficult to pin down exactly what the United States spends annually on social services, but a 2017 report from the Congressional Budget Office showed $1.2 trillion had been collected to fund social services. However, sometimes it can be difficult to tell if that money is being spent effectively or if real results are being achieved, said Jeremy Keele, former president and CEO of the Sorenson Impact Center, who was involved in implementing the preschool program.
On the other hand, the Utah preschool program has measurable results. Its pay-for-success component ran from 2013 to 2018, serving about 4,000 preschoolers in the Granite and Park City districts and four nonprofit or private preschools. To date, only 10 percent of the 454 preschoolers originally determined to be severely at risk for needing special education services have actually needed to access those services, saving the state of Utah $2.5 million. Before the program was instituted, 100 percent of those children would have been expected to access remedial services, said Bill Crim, the president and CEO of United Way of Salt Lake, the project facilitator. Goldman Sachs and the Pritzker Family Foundation were the private investors that backed the project.
As those kids continue through the public school system, Utah will ultimately see savings of $18 million in special education costs, Crim said. Because of the proven effectiveness of the program, the Utah Legislature decided in 2014 to take over funding after the initial five-year period, and another 1,200 preschoolers entered the state-funded program this past fall. The state has begun to repay investors, but even after all loans and interest are paid, it will still see overall savings of $10 million, Crim said.
Nevertheless, the program has faced criticism. Because the success rate was so high, concerns were initially raised that the program evaluation wasn't serious enough, said Janis Dubno, managing director of impact analytics and social innovation at Salt Lake City’s Sorenson Impact Center, who constructed the financial model behind the preschool program.
In addition, some question the concept behind pay-for-success programs, wondering if it wouldn't make more sense for the government to just pay for the programs upfront, rather than retroactively pay back the loan plus interest, which is more expensive, Dubno said. Plus, these programs are "complicated and they can take a long time to put together," she added, which can discourage involvement.
However, pay-for-success programs represent “a paradigm shift in government,” Keele said. “The whole notion is shifting to a social sector where your government and philanthropy and impact investors are paying on the basis of actual events achieved rather than services delivered. The implications of that are pretty powerful.”
Powerful enough, in fact, to catch the attention of the White House.
Utah’s early childhood education program helped inspire a groundbreaking piece of federal legislation called the Social Impact Partnerships to Pay for Results Act.
The act, and the pay-for-success programs its $100 million in federal funds could be used for, were hot topics at the Sorenson Impact Center’s annual Winter Innovation Summit in Salt Lake City, which ran Feb. 6-8.
“SIPPRA became known colloquially as the Sorenson Act in Washington, D.C., because Jim Sorenson played such a big role in it,” Keele said.
Sorenson, who founded the Sorenson Impact Center, has a lot to do with why Utah is considered a national thought leader in the fields of pay-for-success and impact investing.
Sorenson built a decadeslong career as an entrepreneur — he developed communication technology for the hard of hearing — and philanthropist, but soon realized he was “unsatisfied with traditional philanthropy. It seemed inefficient and lacked transparency and accountability. It didn’t move the needle enough to solve the core intractable problems we see in the world today,” he said.
In 2013, he entered the newly formed field of impact investing, or investing in businesses that help solve social problems in a sustainable, scalable way. That same year, he endowed the Sorenson Impact Lab at the University of Utah, which facilitates impact investing around the world.
Soon after, he invested in the country’s first pay-for-success program in New York, which was ultimately deemed unsuccessful, and became an advocate for Utah's preschool pay-for-success program. In 2014, the Sorenson Impact Center won a grant from the White House’s Social Innovation Fund and used the money to help scale the center from one to two employees to more than 40, Keele said. This put the Sorenson Impact Center on the map in the world of pay-for-success and impact investing.
That same year, Sorenson became aware that new legislation was being proposed to create a federal fund for pay-for-success programs, and he got involved with the bill, helping answer questions about technicalities and feasibility. He also led several briefings to help legislators understand the ins and outs of pay-for-success programs.
Sorenson encouraged then-Sen. Orrin Hatch, R-Utah, to sponsor the bill in December 2014, and, in 2018, Hatch appointed Keele to serve as one of nine members on a federal commission to help the U.S. Treasury decide which proposals should receive federal funding. In 2017, Sen. Todd Young, R-Ind., took over the lead sponsorship of the bill in the Senate, with then-Rep. John Delaney, D-Md., as his counterpoint in the House. It was passed in February 2018.
The act is, as Delaney said at the Winter Innovation Summit, “a bipartisan solution.”
It “brings together things each party has advocated for a long time,” Delaney said. “Democrats want more investment against the great issues that we face in society. Republicans want a more conservative structure around the efficiency of these programs, more metrics, more opportunity for innovation. This notion is advancing ideas that each side cares about.”
Of that $100 million in federal funds set aside by the act, $60 million will be available for projects once administrative and other fees are taken out, said Kathleen Victorino, chief of staff at the U.S. Treasury’s Office of Financial Research.
“Of that $60 million, half is targeted for projects that have a direct benefit on children,” Victorino added — something that can be traced in part back to Utah’s trailblazing pay-for-success preschool program.
“Paying for prevention is more effective than paying for remediation. High quality preschool will save the government money in a wide range of areas, including health, education, juvenile and adult crime, and welfare dependency,” Dubno said.
Since the Utah High Quality Preschool Program, state and local entities have been involved with several other pay-for-success programs, said Fraser Nelson, managing director of field building at the Sorenson Impact Center.
Two Salt Lake County programs, called Homes Not Jails and REACH (Recovery, Engagement, Assessment, Career, Housing), just finished their first full year of implementation. The programs aim to help individuals who cycle in and out of homelessness and the criminal justice system by working with nonprofits The Road Home and First Step House. Another program under development, called Healthy Homes Salt Lake, seeks to improve the health of people affected by asthma living along the Wasatch Front.
Sorenson said there may be plans underway in Utah to apply for some of the $100 million in federal funds as well.
“It’ll be interesting to see how SIPPRA unfolds and begins to scale and how we can utilize this in making better decisions on how the government pays for social services in the future,” he said.
It will also be illuminating to finally be able to track how many people are actually helped by these social programs, and how they can be adjusted to better serve communities in the future, Nelson said.
“It’s one thing to waste people’s money,” Nelson said. “That’s a tragedy, but it’s not the biggest tragedy. The real tragedy is the harm we cause the people we purport to serve. We’re promising something we don’t deliver, which harms all of us. If we can help a person become the person they could always have been, that saves our community heartache and hardship.”
Correction: A previous version of this article misspelled Bill Crim and Janis Dubno's names. This article has been updated to reflect the correct spelling.