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Series: Impact Bonds
Education Plus Development

Reflections on Universal Children’s Day: How the U.S. is Paving the Way by Thinking Outside the Box

On the 60th anniversary of Universal Children’s Day, a day dedicated to the promotion of child well-being, we reflect on the state of children around the world and what is being done to improve their lives. While great gains have been made, for example, in reducing child mortality by nearly half over the last two decades, great disparities persist both across countries and within them between the privileged and disadvantaged. These persistent challenges are forcing some policymakers to think outside the box when it comes to financing and delivering interventions that ensure better life outcomes for young children. The United States is paving the way when it comes to thinking creatively about how to provide quality early childhood development (ECD) interventions to more poor children.

Just last month, an announcement was made in Chicago of a project, the second of its kind in the United States, which expands access to high-quality preschool to a greater number of disadvantaged children. This project, funded via a relatively new financing mechanism, a social impact bond (SIB), or pay for success (PFS) financing, as it is generally referred to in the United States, is a way to leverage philanthropic and other private capital to deliver better outcomes of social services. In this case, a $17 million investment from Goldman Sachs, the Northern Trust Company and the J.B. and M.K. Pritzker Family Foundation, allows for risk to be reduced for the government and tax dollars to be spent more wisely since the government only repays investors if agreed-upon outcomes are achieved (as measured by independent evaluators). A key benefit is that, by using data-driven performance management processes, service providers are able to provide better services allowing for an alignment of the interests of a multiplicity of actors who might not otherwise be working together.

Another innovative boost for early childhood development in the United States came earlier this fall in an announcement that the Social Innovation Fund (SIF), a White House initiative and program of the Corporation for National and Community Service, would support the Institute for Child Success, in a grant that will allow the organization to help jurisdictions across the United States to use PFS financing to improve outcomes for young children and their families. This grant could, among other developments, lead to the development of PFS financing for a maternal and child health program in the U.S. program, the Nurse-Family Partnership, which provides nurse home visits to first-time, low-income mothers. Some of the other recipients of the SIF grant have also suggested that they will use their funding to serve our youngest underserved citizens.

Initiatives like these require risk-taking and creative thinking by both the private sector and the government. The abovementioned SIBs for preschool would not have been possible if it hadn’t been for the support of Salt Lake County Mayor Ben McAdams and Chicago Mayor Rahm Emanuel. Beyond those deals and the SIF initiative of the White House, on the government side,   Representative John Delaney of Maryland and Representative Todd Young of Indiana demonstrated their commitment for this outcome-based financing mechanism by sponsoring federal PFS legislation. Next month, the White House Summit on Early Education will bring together elected leaders, businesspeople, education experts, and advocates and philanthropists to discuss opportunities to expand high-quality early education. At the summit, the president will announce $750 million of funding for Preschool Development Grants and Early Head Start Child Care Partnership and will highlight new private sector initiatives to expand opportunities for early learning.

The two social impact bonds for preschool education, the SIF investment for early childhood, proposed legislation for PFS and other government commitments to early childhood represent tremendous potential for improving young lives not only in the United States, but also globally. The Center for Universal Education, in a broader effort to explore innovative ways to address the financing and delivery hurdles faced in ECD globally, is following the above efforts closely as well as others elsewhere in the world to understand better if this makes sense and could be a valuable tool in low and middle-income countries as well as here in the U.S. Whether or not PFS financing or social impact bonds are the solution, we hope that investors, policymakers and governments follow the lead of the United States by exploring innovative new ideas that put young children first.


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