Institute for Child Success - Pay for Success Financing for Early Childhood: A Path Forward.

Published Thursday, January 23, 2014 | by Megan Golden, Joe Waters

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Please find below the Introduction to the report from the Institute for Child Success. For the full report, please see attached or follow the helpful link. 

We can do better for our children. Far too many endure preventable health or behavior problems. They are not prepared for school and do not graduate with the tools they need for successful careers. Programs that can effectively prevent these problems reach only a fraction of the children who could benefit, and they struggle constantly for funding to continue, let alone grow.

The Institute for Child Success (ICS) has dared to imagine a different future: one in which every high-risk mother in an under-resourced state learns to read to her child every day, to use effective parenting when a child misbehaves, and to provide healthy food and exercise; a future in which high-quality medical care, childcare, and early education are the norm. Could we reach a new normal, in which we have robust early childhood programs and fewer children in special education, foster care, and prison? We believe that we can, and that Pay for Success financing can help us get there.

Pay for Success (PFS, also known as outcome-based financing) is attracting increasing attention from many quarters. In PFS, funding for programs is based at least in part on their achieving specific, predetermined outcomes. In one popular type of PFS financing (also called a Social Impact Bond, or SIB) private investors put up capital for proven interventions and government pays them back, after an impartial evaluator finds evidence that the interventions are working. It is a new and still relatively untested mechanism, particularly in the United States, so many questions remain.

ICS believes that PFS holds enormous promise for improving children’s lives. We have already conducted a feasibility study of its potential to scale up early childhood programs in South Carolina, in particular the Nurse-Family Partnership, a successful program for low-income first-time mothers. We learned a great deal about its potential benefits, the types of projects it is best suited for, and challenges to be aware of. We are indebted to the Connecticut Center for Social Innovation2, which specializes in designing metrics and securing funding for early childhood PFS projects, for supporting our work on PFS.

In this brief we share lessons we learned from analyzing the feasibility of PFS for the Nurse-Family Partnership and address how PFS financing might apply to the broader field of early childhood interventions. We hope it will help advocacy organizations, foundations, government officials, and financiers assess how they might use PFS financing to improve outcomes for children.