Even when doing God’s work, Goldman Sachs just cannot help itself. And as usual, Goldman Sachs is allegedly playing by its own rules.

It was supposed to be a win-win deal. Goldman Sachs had put together a “social impact bond” that paid for preschool for underprivileged children in Utah but would also make money for the investors

Goldman announced with great hoopla a few weeks ago that its investment in a Utah preschool program had helped 109 “at-risk” kindergartners stay out of expensive and stigmatizing special education programs. Moreover, the bond investment also led to a $260,000 payout for the Wall Street firm, the first of many payments Goldman anticipates receiving from the bond deal.

Education experts consulting with the New York Times, however, strongly dispute the legitimacy of the success metrics Goldman was claiming for the Utah school program.

Doing God's Work: Goldman Sachs Has 99% "Success Rate" At School

The problem with Goldman Sachs Success metrics

The nine well-known early-education experts who reviewed the Utah program funded by Goldman Sachs identified a number of irregularities the program’s success metrics, which means that Goldman and Utah are far overstating the impact that the investment achieved in helping younger kids stay out of special education programs.

Goldman claimed that the program had helped nearly 99% of the children involved avoid special education in kindergarten. Keep in mind that the megabank was given a payment for each child “saved”. That figure is just preposterous according to the experts. They note that even well-funded preschool programs (the Utah program only had limited funds) have only been able to reduce the need for special education by 50% at the most. In fact, the large majority of well-funded programs only saw reductions of 10 or 20%. According to the early childhood experts, the high success rate of the program (and the payments that were directly connected to that success) were based on a faulty assumption that many of the children in the program would have needed special education without the preschool, when there was almost no evidence or previous research to suggest this was true. “We’re all happy if Goldman Sachs makes money as long as they are making it with smart investments that make a real difference,” explained Clive Belfield, an economics professor at Queens College in NYC with a focus on early childhood issues. “Here they seem to have either performed a miracle, or these kids weren’t in line for special education in the first place.” The problems with the Goldman Sachs Utah school program success metrics make clear the challenges of structuring public-private partnerships such as social impact bonds, as these vehicles require verifiable and agreed-upon methods of measuring success for goals that are notoriously difficult to define (student success, for example).
So basically, Goldman’s deal with the school seems to discourage schools as much as possible from helping students who need special education get it.