Editorial: The promise and risk of social impact bonds

Source: Chicago Tribune, November 8, 2015

If these programs are stringently designed, investors do take risks and an incentive for success is created. An initiative that aimed to reduce the number of offenders who return to prison on Rikers Island failed to reach its benchmarks last summer. Investors lost. We’re all for doing good — and making money. We applaud the instinct of investors who have a social conscience when they invest. Let’s remember, though, that investors are supposed to bear the risk here. There’s promise for more efficient delivery of social programs with higher impact and lower cost. But it’s not hard to imagine how these efforts could be manipulated if standards aren’t high, measurements aren’t transparent and outcomes aren’t independently determined.

Related:

Illinois begins public-private partnership
Source: Associated Press, November 4, 2015

The program could be a model for funding social services and give providers more certainty than the state budgeting process, the Chicago Tribune reported. State officials said details about the project’s structure, costs and measures for success will be sorted out in the coming months. An agreement over the state budget has eluded state leaders for months now. Some bills are being paid through court orders and state law, and lawmakers and state employees are collecting their salaries. But local governments aren’t getting their share of gasoline taxes or state gambling receipts. Human service agencies that contract with Illinois aren’t getting paid or are getting partial payments months late. … The Department of Children and Family Services will focus the pilot program on youth in four counties who are in the child welfare and juvenile delinquency systems. Private investors will cover upfront costs of services that could save the state money by reducing recidivism and better preparing children for adulthood.

State to launch public-private experiment to fund human services
Source: Bonnie Miller Rubin and Kim Geiger, Chicago Tribune, November 2, 2015

Illinois’ troubled child welfare system could soon become an investment opportunity for charities, banks and wealthy citizens under a public-private partnership experiment set to launch Tuesday. … Billed as a “pay for success initiative,” the Department of Children and Family Services will launch the pilot program with a focus on youth in four counties, including Cook and Lake, who are in both the child welfare and juvenile delinquency systems and typically experience poor outcomes, such as ending up with long stays in costly state institutions. … DCFS officials could not say how much money the program might save the state, which currently spends around $94.9 million — or about $123,000 per youth — in residential care and incarceration expenses for children who are wards of the state and part of the juvenile delinquency system. … Whether or not the program is a success will be left up to evaluators at the University of Michigan, who will monitor the program and report back to the state.