Goldman Sachs and the Pritzker Group are joining forces to fund the expansion of an early-childhood program in Salt Lake City's Granite School District through a social-impact bond, Education Week reports.

Sometimes called "pay-for-success" loans, social impact bonds are designed to address a social problem and achieve a positive outcome while reducing future costs to government by investing in proven prevention and intervention programs. The eight-year, $7 million investment by Goldman and the Pritzker Group will be used to increase the number of kids in the preschool program. According to officials at Goldman Sachs, the Utah venture is the first of its kind to finance a public school initiative.

Utah schools receive roughly $2,600 from the state for each student who requires special education. School officials told Education Week that some of those students are placed in special education simply because they lagged their peers academically upon entering elementary school. If fewer children start school at such a disadvantage, the district figures it will save money on special education costs. Although any money saved originates with the state, district officials believe they will be able to demonstrate that the savings were the result of the expansion of the preschool program and persuade state lawmakers to pass the savings on. The district would then use the funds to pay back the loan, plus 5 percent interest. If the program fails to reduce special education expenses, the district won't have to repay the loan.

Any savings resulting from the preschool program's expansion will be calculated by the Early Intervention Research Institute at Utah State University, which is working with the United Way of Salt Lake on the project. Because repayment of the SIB is tied to the performance of the program, some observers are concerned that Goldman Sachs and the Pritzker Group might try to influence district policies if savings don't appear at the expected rate. "Donating money and loaning money are treated very differently, and this is a rare mixture," said Michael Griffith, senior school finance analyst for the Education Commission of the States. "Is it about loaning money and trusting the school district, or, if the results aren't as good as expected, are the investors going to demand that changes be made?"

To some, the complex public-private partnership stands as a test case for SIBs in early education. For their part, SIB advocates hope that by proving the viability of such an arrangement, the Utah venture will encourage investors and governments to back longer-term partnerships that track the benefits of social investment. "I'm certain that as we get some examples developed, and schools deepen their own cost-structure analysis," said Robert Dugger, a former venture investor and current co-chair of the advisory board at ReadyNation, "we'll find pay-for-success possible in elementary and middle school."