With funding from the Social Innovation Fund, Third Sector Capital Partners, Inc. conducted a feasibility assessment for the State of Nevada Department of Education that examined if Pay for Success could be used to increase Pre-K access for some of Nevada’s most vulnerable young children. Once completing the feasibility assessment, Third Sector used additional SIF funds to conduct a landscape analysis of early childhood education funding for the State of Nevada.
Sub-Recipient: State of Nevada, Clark County, and the City of Las Vegas
The State of Nevada, in partnership with Clark County and the City of Las Vegas received assistance from both the Harvard Kennedy School Government Performance Lab and Third Sector Capital Partners, Inc. to explore the use of Pay for Success in creating innovative strategies to improve social outcomes in early childhood education. Specifically, the three jurisdictions engaged in a feasibility study to explore how an early childhood education PFS project could increase outcomes such as kindergarten readiness and third grade literacy, as well as reduce public school special education and remedial education expenditures. The innovative partnership between state, county and city government to address PFS contracting and savings analysis for early childhood education interventions has the potential to serve as a model nation-wide.
Motivation for Exploring Pay for Success
Research has shown that the first five years of life are crucial to a child’s development. High-quality Pre-K programs has the ability to have lasting impacts on children’s lives. Nevada ranks 40th for spending on Pre-K in the country, with only 31.7 percent enrolled (compared to the national average of 47.7 percent). As such, Governor Brian Sandoval and his Administration made the availability of high-quality Pre-K a priority, through the work being done with the Federal Pre-K Development Grant and the State funded Pre-K program. However, even with these initiatives, the need for Pre-K greatly exceeds the availability of resources. The feasibility of a Pay for Success (PFS) project was explored as a tool that could be used to provide additional high-quality Pre-K services to some of Nevada’s most vulnerable young children.
The assessment found that by investing in Pre-K and rigorously tracking the outcomes of children who participate, the State would be able to determine the impact in which investments in Pre-K can reduce negative outcomes (such as the need for special educational enrollment, juvenile crime, high school drop-outs, etc.) and the related costs of delivering these social and criminal justice services. A Pay for Success project would have the potential to yield significant future savings for government and deliver services early in a child’s life that leads to long lasting and quantifiable social benefits.
To help the State understand the national context for public Pre-K, the resource constraints in the State, and examples of how other states have addressed their own Pre-K needs, Third Sector conducted a landscape analysis of early childhood education funding. The analysis provided the state valuable information regarding the state of ECE funding nationally and within the state. This information had not been readily available to the State and provides important context as they evaluate their funding mechanisms and improve their delivery of Pre-K services.
Findings and Insights
The feasibility assessment determined that a PFS project could build upon the existing Pre-K Development Grant and state Pre-K funding. If outcomes were achieved, the benefits would accrue across multiple levels of government. Third Sector identified solutions to many of the challenges a PFS project would present as well as determined that there was a vibrant community of funders and community resources to support a Pre-K PFS project. The feasibility found that a pilot program serving 200 children in the Las Vegas downtown core could serve as a possible pilot location and that space constraints for increased enrollment could be addressed and financed. A significant challenge that would be more difficult to solve is securing qualified teachers. Considering those factors, Third Sector recommended that Nevada proceed with a PFS pilot project.
At the time though, the State realized it did not have a full understanding of the funding landscape or how its own funding resources compared to the rest of the country. Third Sector developed two analyses that provided data that was not readily accessible by the State. One analysis provided data and analysis in support of the State’s efforts to find innovative solutions to investing in early childhood education. It extrapolated current and anticipated future funding gaps and timelines to understand the order of magnitude that would be required from those innovative solutions. The other provided information supporting the State’s decision-making and evaluation of challenges and opportunities triggered by a significant decrease in federal funding for ECE in Nevada. Third Sector collected benchmarks and analysis of education funding mechanisms operating within the State and across the US as well as a review of legislative and funding proposals for expansion of ECE from various states.
The analyses found that Nevada’s Pre-K funding gap could grow from $156M to $206M in 2020 if early childhood education resources remain steady. Nevada’s State Pre-K spending is falling behind the national average state spending per pupil and the differential gap has grown between 2006 to 2015. And while approximately 30% of Nevada’s 3- to 4- year-olds are enrolled in public or private Pre-K, the State funded program only enrolls roughly four percent. Nevada will need to increase State funding resources to maintain a steady level of Pre-K service and account for sunsetting funds.
By looking at other states funding formulas, Third Sector provided suggestions that could assist Nevada in increasing the availability, quality, and access of ECE. Those included a business tax credit, expanding the Quality Rating and Improvement System, pay parity for ECE workforce, supporting proposed legislation (AB 70) seeks to add ECE investment as an allowable use for property tax within redevelopment areas dedicated to education, and increasing capital investment in additional classroom space.
Third Sector Capital Partners, Inc. led the feasibility assessment.