After bursting onto the national scene a few years ago, Pay For Success financing is gaining traction among Colorado school districts and early childhood organizations.
The Early Childhood Council of Boulder County and Adams County School District 50 are both exploring the British-born financing mechanism as a way to pay for underfunded early childhood programs. Aurora Public Schools may use the model as well, to beef up college and career readiness.
The exploratory work by all three groups unfolds as state law-makers consider Pay For Success legislation for the second year in a row. Last year’s bill, which was introduced late in the session and focused exclusively on early childhood programs, died in committee.
The idea behind Pay For Success, or PFS, is that private investors or philanthropists pay upfront for evidence-based social programs. If those programs save public money by preventing costly interventions such as emergency room visits or special education services, the investors are repaid with interest.
The potential savings accrued from Pay For Success projects are calculated by comparing the public costs of an individual or group after an intervention program to the public costs of an individual or group with no intervention.
For example, a school district considering a preschool-based Pay For Success project might use national studies showing that high-quality preschool reduces special education enrollment by 15 percent, to estimate its prospective savings.
If for some reason a Pay For Success project doesn’t yield the hoped-for savings, the investors lose some or all of their money. Therein lies part of the appeal of Pay For Success. While it can inject new funding into effective prevention programs, there is relatively little financial risk to the public entities that stand to benefit from those programs long-term.
When it comes to projects targeting children and youth, the Early Childhood Council of Boulder County is farthest along in the complicated development process. (Among all Colorado projects, a Denver effort to address chronic homelessness among adults is closest to fruition.)
The council is studying the possible expansion of a 30-year-old home-visiting program—the “Community Infant Program”—that aims to prevent child abuse and neglect. If the current cost-modeling work shows an expansion is feasible, the project could launch in 2017 with an five-year investment of $2-4 million. It’s not yet clear who the project’s investors would be.
“We’re not seeing any yellow or red lights. They’re all green,” said Bobbie Watson, executive director of the council.
Growing school district interest
In the last few months, local school districts have also begun testing the waters of Pay For Success. Both Adams 50 and Aurora have applied for grants through the University of Utah Policy Innovation Lab, one of a several intermediary organizations distributing federal dollars to build PFS capacity. The grants of up to $250,000 would primarily pay for new in-house employees to help develop PFS projects in each district.
Adams 50 is also an alternate finalist for a grant through the Boston-based Third Sector Capital Partners, another intermediary for Pay For Success capacity-building grants.
The two districts’ bid for such funding speaks to one of the biggest challenges facing organizations interested in the Pay For Success path: the need for money and expertise long before a project launches.
“This is the big problem with PFS right now,” said Mary Wickersham, a consultant working on the Boulder project. “There’s this dearth of funding on the front end.”
While Watson and her team raised around $150,000 to cover those costs, it’s not easy.
Of the more than 40 Pay For Success proposals received in response to a state “Request For Information” in 2013, only two–Denver’s chronic homelessness project and Boulder’s home-visiting project–are actively moving forward.
Dozens of others, “some portion of which could be great deals … are kind of languishing right now for want of support to get them to the finish line,” said Wickersham.
Preschool potential
Following in the footsteps of school districts in Chicago and Salt Lake City, Adams 50 is considering a PFS project that would expand preschool access. Specifically, the district and two community partners, Growing Home and the Early Childhood Partnership of Adams County, want to increase the number of full-day preschool slots in the district and add parenting classes.
The hope is that such a PFS program would decrease special education costs and improve early reading scores, said Mat Aubuchon, director of early childhood education in Adams 50.
“I think it’s exciting: a potentially totally different kind of funding stream in [early childhood education],” he said.
While half-day preschool is relatively accessible in the district, Aubuchon said there are very few state-funded full-day slots and most families can’t afford to pay for it out of pocket. Three-quarters of the district’s students are eligible for free or reduced-price meals, a proxy for low-income status.
The district and its partners are just starting to hold meetings on Pay For Success with potential investors in the philanthropic community, said Aubuchon. The earliest any project could launch is the 2016-17 school year.
“Obviously, we’re at the very infancy state of even exploring something like this,” he said.
Creating a college-bound culture
Meanwhile, Aurora Public Schools, in partnership with the Aurora Public Schools Foundation, is looking at Pay For Success with an eye toward improving outcomes for older kids.
Borrowing a concept used in Denver schools, the project under consideration would establish “Future Centers” in district high schools where students would get advising on all matters related to college and career readiness. The goal is to strengthen the district’s college-bound culture, decrease drop-out rates, and reduce the need for remediation.
“There’s some really clear metrics of deliverables” around post-secondary readiness, said Cheryl Miller, the district’s assistant director of grants and federal programs. “It perfectly aligns to our new strategic plan.”
Among the state’s 15 largest school districts, Aurora had the lowest on-time graduation rate last year: 55.9 percent. Statewide, 77.3 of high school students graduated on time.
Miller said the district initially considered a preschool-based PFS initiative, but wanted to differentiate itself by trying something outside the early childhood arena.
The goal was to be “doubly innovative,” she said.
More money for mental health
The Early Childhood Council of Boulder County began exploring Pay For Success in late 2013. Intent on using the model to make a positive impact on the youngest children, the council looked at six home-visiting programs already operating in the county.
“My board has particular interest in the birth to three population,” said Watson. “That’s where you get your best return on investment.”
The Community Infant Program, in which nurses and psychotherapists work with families around mental health, rose to the top of the list.
“We have a 30-year track record and I think people were pretty excited about the longevity in the community,” said Program Director Janet Dean.
The program, which has 20 employees and an annual budget of $1.5 million, helps parents create healthy relationships with their babies by addressing issues ranging from post-partum depression to anger, stress and mental illness.
Absent such intervention, children may experience abuse or other types of toxic stress that have long-term consequences on their health, education and well-being. There are financial consequences too, often incurred by the public sector. These can include expensive hospitalizations, court proceedings or entry into the foster care system.
If the number-crunching underway now confirms expectations, Pay For Success funding represents a front-end investment that could defray those back-end costs.
Dean said there are usually 20-30 families waiting for services from the Community Infant Program. An expansion would allow the organization to better serve families in the mountains on the west side of the county and those around Longmont, Lafayette and Louisville.
“We have families waiting for our service,” she said. “Mental health is just not funded, in general, to the level it needs to be funded.”