Chicago Pre-K Social Impact Bond

A group of private investors, led by Chicago billionaire J.B. Pritzker, will invest $16.9 million in an innovative financing scheme that allows Chicago to expand pre-kindergarten programs for more than 2,000 low-income children over the next four years. If it works, in terms of reducing the future costs of special education and remedial programs, the investors aim to get their money back, plus interest, but at no cost to taxpayers. The financing technique is sometimes called a “social impact bond” or “pay for success” financing. In this scenario, Chicago Public Schools will get about a third of the savings generated if the program succeeds, with the rest going to pay back investors. “This is an alternative method of financing something that truly is game-changing,” said Mr. Pritzker, co-founder of Pritzker Group and a scion of one of Chicago's wealthiest families. “If you can intervene with at-risk children at early ages, it truly changes the trajectory of their lives." Chicago's will be just the fifth social impact bond program in the U.S., an idea that originated in the United Kingdom. It's only the second to focus on early education and the first education-oriented program in a big city. The Chicago initiative is modeled after a pre-K social impact bond program Mr. Pritzker launched last year in Utah. Other social impact bond programs have been aimed at keeping former convicts from returning to prison.