On September 5, the state of New York issues a Request for Information (RFI) asking interested parties to comment on its plans to roll out a new pay-for-success initiative addressing crime, education, health and other state priorities.
Initial inquiries are due September 18 and the responses are due October 15. According to the RFI, “Once promising opportunities are identified, the State anticipates seeking any necessary legislative authority and then commencing a formal solicitation, review and selection process for Pay for Success initiatives.”
The RFI identifies the following priority areas:
- Reducing Crime. Initiatives in this area could include, but are not limited to services for at-risk youth aging out of the foster care system; services including education and training for youth in the juvenile justice system or education and job training for adults in the correctional system; housing programs including half-way houses for sex offenders and for inmates being discharged from prison; and programs that improve connections between inmates and services in their home communities.
- Educating our Children, Youth, and Young Adults. Initiatives in this area could include (but are not limited to): early intervention programs to improve kindergarten readiness, including interventions that operate at the community level; and after-school programs that reduce high school dropout rates or initiatives that increase college enrollment and completion.
- Investing in Our Workers. Initiatives in this area could include (but are not limited to): providing training to displaced workers to give them the skills they need to find new jobs or providing training to at-risk youth entering the labor force for the first time; assisting public assistance recipients obtain living wage work; helping low-income noncustodial parents connect to both work and their children; and reconnecting the long term unemployed to the labor market.
- Improving Health and Reducing Health Care Costs. Initiatives in this area could include (but are not limited to): supportive-housing for chronically homeless individuals; nurse-family partnerships to serve first-time mothers; broader community home visiting programs to promote health, improve kindergarten readiness, and reduce childhood developmental delays; proven effective models of addressing and preventing diseases such as asthma and lead poisoning, especially those that can reduce emergency department visits and other health care costs; and aging in place support for the elderly.
- Partnering with Local Governments. The Governor has secured significant mandate relief that will provide billions of dollars of savings for local governments – including State takeover of growth in the local share of Medicaid costs, a phased takeover of local Medicaid administration expenses, and historic pension reform. However, the State remains committed to providing further assistance, and would welcome ideas related to programs that are jointly administered or overseen by the State and its local partners, or programming in which the cost is borne by one level of government but the savings are realized by another level.
- Place based strategies. Initiatives in this area could include setting a goal of ensuring a cohort of children successfully make it to first grade by incentivizing a collection of providers and State services (e.g. education) to focus on the single goal of reaching first grade, or raising capital to put streetlights in crime hotspots thus lowering police and local jail costs by the reductions in crime.
In related developments, a new post on social impact bonds has been posted at the Wharton School of Business “Knowledge@Wharton” blog. The blog includes the following interesting quotes:
[N]ot all social programs lend themselves to the SIB approach. [Wharton management professor Keith Weigelt] says SIBs are best suited for programs where results can be evaluated in a couple of years. “In this embryonic stage, you are best off focusing on programs where you can assess results in the short term,” Weigelt suggests. “If you need to wait 10 years to see if the goal was hit, that is not a good project for a SIB.”
At the same time, there will be challenges in determining how well programs are working. With homelessness or prison programs, it is fairly straight forward to track whether the desired outcomes are being achieved. But with other social services the measurement of success may be more nebulous.
“You can track someone who is incarcerated and see if [he or she is] re-incarcerated,” says Rosqueta of the Center for High Impact Philanthropy. “But think about issues like improving teacher quality or reducing hunger or addressing mental illness. People aren’t yet clear in some cases what they ought to be tracking. What does success look like? And even when there is a common understanding of success, measuring whether or not it happened can be logistically tough.” Wharton’s Hsieh seconds her point, noting that “making connections between what we as a society care about and what we measure in terms of the bond can be tricky.”
Hsieh also notes that the market will need to develop some level of standardization around the bonds. “We will need a set of metrics and data, so that investors can compare returns” for one deal versus another, he says. “Right now, there isn’t a standard way of doing that.” This may be slower to develop than some might like because the deals are likely to be tailored to the needs of a particular government and its local problem. “The decisions and the structures are being driven at the city, county and state level,” says the Nonprofit Finance Fund’s Giantris. “This will bubble up from the local level so that we will end up with a lot of different models.”
Regardless of the challenges, proponents of SIBs see great promise in the new tool. And they have government partners hungry for ways to do more with less. “Our phone is ringing off the hook,” says Third Sector Capital Partners’ Overholser. “The fiscal crisis is making government officials willing to try things they might not otherwise.”