social impact bonds

  • The Invisible Heart

The Client: Reginald

Today Chicago’s West Garfield Park has the city’s highest murder rate, an average household income of $10,000 and scores 92/100 on the city’s hardship index.

LaTonya’s family has lived here for three generations. A single, working Mom, she’s raised seven of her children in a neighbourhood apartment building, owned by her grandparents.

In this video her youngest, four-year-old Reginald, gives a tour of their home:

It was just in front of their apartment building that LaTonya’s older son, 21-year-old Jaylin, was shot. For Reginald, Jaylin's death is especially painful. He was both an older brother and a father figure to him. Every day Jaylin used to walk Reginald to pre-school at Melody Elementary.

The neighbourhood school is one of five sites chosen to be part of Chicago’s first Social Impact Bond. Goldman Sachs, the Pritzker Foundation and Northern Trust have invested $17 million to send 2,600 preschool students to school. Reginald is one of them. If the students test well, reducing the need for special education, the investors will be paid a profit – up to 8 percent.

“I don't know if the parents really know that it's a social impact bond. I think that for them, they were super-excited, and they didn't care how it got here,” says Melody head teacher Michelle Stewin. “We have a waiting list and parents want to get their students in school. I just wish that sometimes we had a bigger center because there is such a need.”

Chronically underfunded Chicago’s public school system is on the brink of bankruptcy. School closures and reduced class time are the norm. In 2011, Melody was one of three city schools where teachers voluntarily stayed an extra 90 minutes each day. Over the years Stewin has often had to turn to private grants to buy school supplies. Stewin is keenly aware of all of the challenges facing her students in and outside the classroom.

In this video clip, Michelle Stewin talks about how Reginald is doing:

Two of Chicago’s SIB investors also funded the world’s first early education SIB in Utah, similarly designed to reduce remedial education costs. While most preschool programs reduce the number of students needing special education by 10-20%, the Utah program reported a 99% success rate and paid investors the highest possible return.

The New York Times commissioned nine early childhood experts to review the Utah program’s evaluation method. All found it to be flawed and based on faulty assumptions.

“We’re all happy if Goldman Sachs makes money as long as they are making it with smart investments that make a real difference,” said Clive Belfield, an economics professor at Queens College in New York. “Here they seem to have either performed a miracle, or these kids weren’t in line for special education in the first place.”


© 2017 by HitPlay Productions 

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