Chicago Child-Parent Center Pay for Success Initiative

Last updated Tuesday, October 17, 2017

Quick Facts

Current Phase
Issue Area
Service Period
Project Scope
Implementation Start

High-quality early education is the key to a successful academic career later in life.  In Chicago, there is a shortage of publically-funded, high-quality pre-kindergarten seats available to low-income families.  The Chicago Public Schools Child Parent Center is addressing this issue by expanding their half-day preschool model to work with 2,620 students and their parents to improve educational outcomes for children from low-income communities.  Funded by a $17 million social impact bond, the project hopes to increase kindergarten readiness, reduce the need for special education services, and increase third grade literacy in four years.


  • Market Overview

    • Year Launched
    • Service Delivery Term (Years)
    • Motivation for Project
      Chicago Public Schools serving low-income families have a shortage of publically-funded, high-quality pre-kindergarten seats available.
    • Project Objective(s)
      Increase school readiness and academic performance; Reduce the need for special education services
    • Individuals Served
    • Geography
      Chicago, IL
    • Issue Area
      Early Childhood Education
    • Initial Investment ($ millions) [Note 2]
    • [2] This category captures the initial private investment raised to support the project that has the potential to be repaid if the project achieves its pre-determined outcomes. Many projects, particularly those in the supportive housing and health arenas, leverage existing public resources, such as subsidized housing and health insurance, to achieve program impact; the value of these resources is not included in these dollar values but are discussed in more detail in Sections 7, 8 and 9 of this report.
  • Project Partners

    • Service Provider(s) [Note 1]
      Chicago Public Schools Child-Parent Center
    • Payor(s) [Note 2]
      City of Chicago; Board of Education of City of Chicago [Note 10]
    • Transaction Coordinator(s) [Note 3]
    • Evaluator [Note 4]
      SRI International
    • Validator [Note 5]
    • Project Manager [Note 6]
    • External Legal Counsel [Note 7]
      Kirkland & Ellis LLP; DLA Piper; Chapman and Culler LLP
    • Technical Assistance Provider(s) [Note 8]
      Government Performance Lab; Metropolitan Family Services
    • [1] Delivers program interventions to target population over the course of the PFS contract
    • [2] Makes payments when pre-determined outcomes have been met
    • [10] The City of Chicago and the Board of Education of the City of Chicago (Chicago Public Schools) are both payors but are paying for different success outcomes. City of Chicago is paying for outcomes related to kindergarten readiness and third-grade literacy, while Chicago Public Schools is paying for an outcome related to avoided special education costs.
    • [3]Roles and responsibilities may include: design and structure of PFS project and financing model; capital raise; stakeholder management; on-going performance management
    • [4] Design and implement plan for determining whether outcomes have been met
    • [5] Verify accuracy of data used in evaluation plan, or evaluation plan itself
    • [6] Intermediary during service delivery phase, and/or fiscal sponsor for project funds
    • [7] Provide assistance in drafting, reviewing and negotiating PFS contracts
    • [8] Provide support and expertise to project stakeholders in the project development and/or project implementation phases
  • Evidence and Program Design

    • Service Intervention(s) Model and/or Type
      Half-day preschool: Child-Parent Center
    • Evidence base for intervention
      1 longitudinal study, quasi-experimental design
    • Has effectiveness of the intervention for PFS project target population been evaluated?
    • Has the service provider provided this intervention previously?
    • Is PFS project: Scaling an existing intervention by replicating at a larger scale? Demonstrating the effect of a new program model or combination of services? Transplanting an existing intervention(s) to a new target population and/or service delivery setting?
  • Evaluation

    • Evaluation Design Methodology
      Quasi-experimental: Propensity Score matching
    • Data Source(s) for Evaluation
      Board of Education of Chicago Public Schools
    • Outcomes Tied to Success Payments
      1) Kindergarten readiness; 2) Avoided use of special education services; 3) Third Grade Literacy
    • Outcomes Tracked, Not Tied to Success Payments
      Student mobility and retention; Improvements in social-emotional learning; Parent engagement; School attendance
    • Length of Evaluation Period
      17 years
  • Service Provider Characteristics and Service Delivery

    • Single or multiple service providers?
    • Service provider type(s) (nonprofit, government, private)
    • Service provider OR site selection method
      Expansion sites selected by Chicago Public Schools based on demographics and need
    • Service Provider Experience with PFS Intervention
      Existing implementation sites, plus expansion sites
    • Referral Method for PFS Target Population
      De facto enrollment for all students enrolled at PFS program sites
    • Did the project have a ramp-up phase? (Y/N; brief description)
      Yes: 1 year service ramp-up period after PFS transaction launch; only outcomes for students enrolled for full year counted in program evaluation
  • PFS Contracting and Governance

    • Operational Oversight Structure [Note 1]
      Steering committee includes payors, project manager, technical assistance provider and local education experts
    • Frequency of meetings and/or reports
      Monthly in first year, quarterly thereafter
    • Executive Oversight Structure [Note 2]
      Not available
    • Frequency of meetings
      Not available
    • Investor role in project governance?
      Can attend any operational or governance meeting by request
    • Frequency of reporting to investors
    • Non-standard Contract Termination Events [Note 3]
    • Appropriations Risk Mitigation Strategy [Note 4]
      Annual appropriations into escrow account
    • [1] Committee or working group involved in regular and/or day-to-day monitoring of project progress
    • [2] Oversight and decision-making body for PFS project
    • [3] Events that allow stakeholders to exit their contractual obligations, beyond those typically found in loan agreements and contracts
    • [4] Means by which to mitigate risk that funding is not available for investor repayment
  • Investors

    • Senior Investor/ Lender and Total Senior Investment ($MM)
      Goldman Sachs ($7.33); Northern Trust ($5.33); ($12.66 total)
    • Subordinate Investor/ Lender and Total Subordinate Investment ($MM)
      J.B. & M.K. Pritzker Family Foundation ($4)
    • Deferred Fee Source and Total Deferred Fees ($MM)[Note 1]
    • Recoverable Grant Source and Total Recoverable Grants($MM)[Note 2]
    • Non-recoverable Grant Source and Total Non-recoverable Grants ($MM)[Note 3]
    • Guarantor and Guarantee ($MM) [Note 4]
    • Illinois Dually-Involved Youth Project
    • [1] Deferred fees are delayed payments for the services provided by service providers, transaction coordinators and/or project managers. Deferred fees are one way of structuring projects so that more stakeholders have a financial interest in ensuring project success.
    • [2]Philanthropies can use either their regular grant making protocols, or protocols for program-related investments (PRIs), to contribute to PFS capital stacks. If a foundation does not use a PRI, their investment may be structured as either a loan or a recoverable grant. The distinction between the two is in the expectation of repayment. A loan, even if from a philanthropic source, is expected to be repaid, and structured accordingly. A recoverable grant does not bear the same expectation of repayment.
    • [3] Non-recoverable grants are traditional grants contributed to capital stacks; if the project is successful and generates full repayment, the non-recoverable grants can remain with the service provider or project manager, or be recycled by the original funder.
  • Basic Repayment Structure

    • Initial Investment ($Millions)
    • Maximum Repayment Funds Committed by Payor ($Millions)
    • Full service delivery term (years)
    • Full repayment period (years)
    • Interim outcomes reported? Tied to payments?
    • Sustainability/ Recycling of Funds
      None specified
  • Detailed Repayment Terms

    • Interest
      Not available
    • Trigger for initial repayment of principal [Note 1]
      Any positive difference between treatment group and national averages on: 1)Special Education Outcome; 2) Kindergarten Readiness Outcome; 3) Third Grade Literacy
    • Threshold for full repayment of principal
      Not available
    • Threshold for full repayment of principal plus maximum success payments
      Not available
    • Repayment timing
      Senior: annually, year 2-9; Subordinate: annually, year 10-17
    • Return to Investor [Note 2]
      6% (average)
    • Success Payment to Other Stakeholders? [Note 3]
      Not available
    • [1] Initial repayment does not equate to full principal return. Investors may recover only part of their principal if projects do not meet a certain level of success.
    • [2] There is no standard methodology for calculating investor return. These numbers are what is publically reported, and comparing from one project to another may not be an apples-to-apples comparison for the reason of potentially different calculation methodologies. Calculation methodologies may be provided in investor agreements, which are not available publically and were not available for this report’s analysis.
    • [3] Success payments for other stakeholders such as project managers and service providers create a financial incentive for project success.
  • Project Costs

    • Project Development Costs Not Covered by PFS Capital Raise
      Government Performance Lab Fellow
    • Funding source(s) for project development costs, if any
      Not available
    • Project Implementation Costs not covered by PFS Capital
    • Funding sources for implementation costs not covered by PFS capital
      Finnegan Family Foundation