The anti-school-choice crowd can’t stop kvetching about corporate reformers trying to make a killing by privatizing public education. It’s an emotionally powerful argument, but an economically illiterate one. The “billionaire boys club” and hedge fund plutocrats no doubt have many more profitable prospects than philanthropically funding nonprofit charter management organizations.
“Despite its potential, ["pay-for-success" partnerships] are still largely unknown to even the most seasoned education wonks, and only a handful of pilot programs are operating at the moment.”
And that’s kind of a shame, really. The private sector can deploy more resources more flexibly and at greater scale than the bureaucratic public sector. But the incentives haven’t been aligned for private investors to do well for themselves by doing good for kids—until ESSA.
There’s a “sleeper provision” in ESSA that holds the potential to reshape secondary education by enabling “pay-for-success” (PFS) partnerships for dropout prevention.
Despite its potential, PFS is still largely unknown to even the most seasoned education wonks, and only a handful of pilot programs are operating at the moment. PFS is an innovative funding tool that drives government resources toward effective, results-based programs. In a PFS contract, venture philanthropists provide the capital to a third-party social service provider to pilot or scale up a promising effort to achieve specific social outcomes. If a program achieves these outcomes based on transparent, agreed-upon metrics, the government pays investors back at a profit. Presumably, the social benefits of a successful PFS program will save taxpayer money down the line. If the project isn’t successful, the public pays nothing for the experiment.
PFS partnerships for dropout prevention could do far more than just help kids get a diploma. After all, it’s all too easy for a high school to hand out more diplomas without actually serving its students better; that’s borne out by twelfth-grade NAEP scores, which have been falling even as our high school graduation rate has risen higher than ever. And a high school’s responsibility stops when its students graduate. It has no incentive and little capacity to look after its graduates.
But PFS partnerships for dropout prevention could help foster the outcomes we really care about: making sure that at-risk students find steady employment, stay on the right side of the law, and ideally pursue post-secondary education. If funders stand to see a return on investment only when their program helps kids they serve succeed in life, they’ll have every incentive to provide specialized, personalized attention to at-risk teens—not just while they are students, but well into young adulthood.
These partnerships could take any number of forms depending on the decisions of policy makers, investors, and social service providers. I’ll throw just two ideas out: call them the Margin Call and the Bullish Bet:
The Margin Call
PFS partnerships could provide at-risk students with targeted tutoring and mentoring. Evidence abounds that one-on-one tutoring is the most effective educational intervention, and there’s no shortage of caring citizens who would love to help their communities’ most troubled students, but it’s hard to mobilize an army on a volunteer basis. With PFS funding, Tocquevillian associations could train and pay platoons of citizens to help at-risk teens graduate and then guide them through the first years of young adulthood.
The Bullish Bet
A bolder approach would be to establish PFS contracts with charter management organizations to operate specialized alternative high schools for at-risk teens. Right now, alternative charter high schools are few and far between, and it’s a small wonder why. These schools take on the most vulnerable students with less funding than public schools, but they’re held to the same (or even more onerous) standards as charters serving mainstream students. A PFS contract given to an alternative charter high school could facilitate private investors to channel more funds toward the highest-risk students. Because the investors will only see a return if those students lead stable, productive lives after graduation, these alternatives would likely establish an alumni services department the likes of which traditional public schools have never seen.
“A bolder approach would be to establish PFS contracts with charter management organizations to operate specialized alternative high schools for at-risk teens.”
Now, traditional schools might be reluctant to counsel their at-risk students toward these alternatives. But under ESSA, state policy makers could design an accountability system with a set of school interventions that would give dropout factories every reason to steer the students they don’t think they can graduate toward specialized alternatives, leaving the traditional public schools better able to focus their attention on the students truly at the margins. If a state went big and bold, PFS-financed alternative charter high schools could flourish within a few short years, changing the landscape of secondary education.
No doubt, most states will let ESSA’s “sleeper provision” rest in peace. After all, there’s a powerful interest group in education that abhors the notion of anyone (else) profiting off of kids. Any effort to promote PFS will bring on the tired chorus of complaints about the privatization of public education.
For all their hysterical rhetoric, these folks do have one point. It’s fair to worry about the profit motive in education if a firm’s bottom line is based solely on getting students into seats. These observers fear that the charter movement is opening a window for a firm like Goldman Sachs to swoop in and finance the strip mining of public education, reaping profits no matter how poorly they serve their students. But with pay-for-success, the incentives all line up. Investors will only see a profit if they do right by their students. So the most promising thing for America’s at-risk teens would be for Goldman Sachs to get in the game.
Even if these programs were funded by Wall Street, it wouldn’t truly be a corporate privatization. Rather, it would be a civil society invigoration. PFS would help direct funding and organizational capacity to the task of educating the hardest-to-serve students. Traditional public high schools don’t need to be the only choice these kids have.
Sure, investors would profit if those kids graduate, get jobs, and stay on the right side of the law. But it’s a whole lot cheaper—and more moral—to pay rich folks for success than it is to imprison poor kids for failure.
This piece was originally published by the Thomas B. Fordham Institute
This piece originally appeared in Thomas B. Fordham Institute