Category Archives: Social.Impact.Bonds/Pay.For.Success

Pay for Success Feasibility Tool Kit

Source: Office of Planning, Evaluation and Policy Development, U.S. Department of Education, October 2017

The U.S. Department of Education’s (ED) mission is to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access. ED supports initiatives to help expand opportunities and improve education for students from early childhood to adulthood, particularly approaches that are based on evidence of potential or actual success. Pay for Success (PFS) can be used to support evidence-based approaches by leveraging private investment to address societal problems and challenges while typically using government funds to pay only when measurable, positive outcomes are attained. This tool kit is an introductory guide for state and local governments and other stakeholders interested in exploring the possibility of a PFS project for education or related societal issues. It provides information to support stakeholders in determining if PFS is a viable financing strategy for them; it lays out steps usually involved in conducting a feasibility study and highlights critical questions and important safeguards to consider in using PFS. The Appendix includes tools that may be useful for PFS projects, including definitions of terms used throughout the document. …

Full Pay for Success Feasibility Tool Kit.

Private Prisons Boost Lobbying as Federal Detention Needs Grow

Source: Dean DeChlaro, Roll Call, October 25, 2017
 
One of the country’s largest private prison companies is spending record amounts on lobbying amid efforts by the Trump administration to detain more undocumented immigrants, federal records show.  The GEO Group, which has contracts with Immigration and Customs Enforcement, the Bureau of Prisons and the Marshals Service, has spent nearly $1.3 million on lobbying from Jan. 1 through Sept. 30, according to new lobbying records filed with Congress. That tops $1 million spent last year. The firm spent at least $400,000 on seven lobbying firms in the third quarter alone, the disclosures show.   GEO’s increased spending comes as ICE is seeking proposals for five new immigrant detention facilities and the Homeland Security Department is asking Congress to fund more than 51,000 beds, up from the current 34,000. ICE is the Florida-based prison company’s biggest customer, according to its 2016 annual report. …

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Immigrants Are Dying in U.S. Detention Centers. And It Could Get Worse.
Source: Brendan O’Boyle, Americas Quarterly, July 17, 2017

… Trump’s policies are already increasing the number of people held in detention centers, further straining the system. … The administration has signaled its commitment to private prison companies, which also operate immigrant detention centers. This alarms detainee advocates, since five out of the seven detainees who died this year were being held by privately operated providers, and multiple investigations have found privately operated prisons to be more dangerous for inmates. … As it pushes for more detentions, the Trump administration also reportedly has plans to weaken protections for immigrant detainees. …

Immigrant Deaths in Private Prisons Explode Under Trump
Source: Justin Glawe, Daily Beast, May 30, 2017

Men and women held by Immigrations and Customs Enforcement are on pace to die at double the rate of those who died in ICE custody last year, a Daily Beast review of ICE records found. And most will die in privately run facilities. Eight people have died in ICE custody in the 2017 fiscal year, which began on Oct. 1, 2016. That’s almost as many as the 10 who died in the entire 2016 fiscal year. All but one of the deaths this year, and all but two last year, occurred in privately run prisons. Nine of the 18 deaths occurred at facilities run by GEO Group, the nation’s second-largest private prison company. …

The problem with privatizing prisons
Source: Farah Mohammed, Daily JStor, May 15, 2017

… The theory behind private prisons has translated poorly into practice, however, and has been strongly criticized. Studies showed there were minimal savings compared to using public prisons. A scandal involving the murder of an Oklahoma couple by escaped inmates was linked to lax security at their private facility. Another private Ohio prison saw thirteen stabbings, two murders, and six escapes in its initial 14 months.  In 2011, a Court Judge was convicted in a “cash for kids jail scheme,” in which private prisons had paid him to dole out harsh sentences in order to maintain their prison population. … Under Trump, inmate numbers are expected to increase substantially, following a crackdown on illegal immigration and a new insistence on mandatory minimums (where repeat offenders of even non-violent crimes must serve sentences of years). …

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Social Impact Bonds wrong direction for Manitoba’s social services

Source: CUPE, July 6, 2017

Today the Manitoba government announced the opening of a request for proposals for Social Impact Bonds, a scheme in which private companies profit off social service delivery. “There was a time when the private sector would simply make philanthropic donations as part of their corporate responsibility to the community” says Terry Egan, President of CUPE Manitoba. “Social Impact Bonds take that corporate philanthropy and turn it into a private money‑making scheme.” While Pallister claims that Social Impact Bonds would foster “private-sector innovation,” these companies will seek to invest in only the non‑government agencies that would see profitable outcomes, rather than programs that seek to address long‑term root causes of many of societies deep and complex issues, including poverty. …

Expanding the Fight for Education

Source: Michael Fiorentino & Jessica Wender-Shubow, Jacobin Magazine, March 24, 2017

Except for some pockets of suburban activism around standardized testing, education policy debate in recent years has centered on cities. In places like Chicago and Boston, grassroots coalitions of teachers’ unions and community organizations are struggling to wrest control of their public schools back from the privatization program backed by hedge-funder owners and their lackeys. Suburbs have distanced themselves from those debates. Even in the recent successful campaign against charter school expansion in Massachusetts, the suburban districts often limited their arguments to protecting their funding. In Brookline, Massachusetts, however, the discussion around schools has been changing. A campaign for fair contracts has drawn attention to how corporate education reform is seeping into the day-to-day operations of affluent schools. …

… More striking has been Brookline’s growing awareness of the composition of its school committee, which is dominated by employees of Bain Capital’s pro-charter, pro-privatization venture philanthropy arm, Bridgespan. Bridgespan’s flagship “Billionaire Dollar Bets” eschew local democratic oversight of family intervention and community development, preferring to enlist billionaires to address poverty directly. Meanwhile, wholesale economic and political dispossession of marginalized communities continues. …

Impact Investing Is a Distraction from Improving Government Performance

Source: Matt Tyler, Kennedy School Review, March 3, 2017

I thought impact investing was central to curing social ills. Government was secondary, in my mind. I was wrong. Over the last 18 months, working with governments in the United States and Australia, I have focused on how to improve social outcomes for the most vulnerable. … I have come to realize that hype surrounding impact investing distracts our brightest minds from a pursuit with greater potential—improving government performance. For those who strive to make a social contribution in their careers, the word “impact” may be an attractive but ultimately misleading lure. … Essentially, they seek to do good while making a profit. But these dual objectives cannot always be achieved simultaneously. At its worst, impact investing is the epitome of putting lipstick on a pig. Consider TPG, a private equity firm accused of collusion and fraud that settled out of court in both cases. In December 2016, supported by U2 front-man Bono, they launched their Rise Fund that seeks to achieve “social and environmental impact alongside financial returns.” Concurrently they invest in gambling, fast food, and fossil fuels including coal. In contrast, government investment takes place unencumbered by a profit motive. The overarching objective of government is improving people’s lives.

… One exception to the above critique is impact investment that aims to improve government performance. Under a Social Impact Bond, for example, private financiers are paid by the government upon delivery of social outcomes such as decreased recidivism, homelessness, and unemployment. To measure these outcomes, rigorous data collection and evaluation, are needed; both vital ingredients to reforming government. A government payer holding the purse strings—instead of private or hybrid investees—means purpose is likely to be prioritized over profit. That said, achieving scale remains a challenge. …

Toward the Efficient Impact Frontier

Source: Michael McCreless, Stanford Social Innovation Review, Winter 2017

For many years, the field of impact investing played host to great debates that involved seemingly irreconcilable positions: Was it possible to achieve both market-rate financial returns and meaningful social impact? Could philanthropic funding coexist effectively with commercial investment? Now, as the field reaches a new stage of maturity, leading social finance organizations are developing models that bring greater sophistication to the work of evaluating investment options. These models, like the investors that create them, vary widely. But they reflect a shared commitment to moving beyond simple either-or choices—and to moving from broad questions to specific solutions. At Root Capital, leaders are using ideas from mainstream financial analysis to calibrate the role that subsidies play in their investing practice.

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Across the Returns Continuum
Source: Matt Bannick, Paula Goldman, Michael Kubzansky, & Yasemin Saltuk, Stanford Social Innovation Review, Winter 2017

For many years, the field of impact investing played host to great debates that involved seemingly irreconcilable positions: Was it possible to achieve both market-rate financial returns and meaningful social impact? Could philanthropic funding coexist effectively with commercial investment? Now, as the field reaches a new stage of maturity, leading social finance organizations are developing models that bring greater sophistication to the work of evaluating investment options. These models, like the investors that create them, vary widely. But they reflect a shared commitment to moving beyond simple either-or choices—and to moving from broad questions to specific solutions. Omidyar Network has built a framework for pursuing investment opportunities that takes into account not only firm-level impact but also market-level impact.

Read full report.

Paying for success

Source: Jason Axelrod, American City and County, February 6, 2017

Several local and state governments are pioneering a new investment model to finance projects in their areas that uses success as a payment benchmark. Social impact bonds (SIBs) — also known as pay-for-success models — involve public-private partnerships (P3s) in which private entities invest in public projects that are overseen by governments, organized by nonprofit intermediaries, executed by service providers and are ultimately evaluated by independent entities. Such projects generally tackle social issues like homelessness or family welfare, and they aim to reduce government dollars spent on existing measures. Unlike a municipal bond, an SIB has no fixed rate of return for investors. An SIB’s ROI yield depends entirely on the project’s success, based on outcomes defined in the SIB contract. At pre-defined points in the project’s execution, a study of the program’s effectiveness will be carried out, and the government will accordingly pay funders pre-defined amounts based on how certain benchmarks are met. …

… The Denver Social Impact Bond program provides up to five years of supportive housing and Assertive Community Treatment for 250 homeless repeat offenders who cost taxpayers over $7 million per year in legal and health care-related expenses, city documents show. … In 2013, the Connecticut Department of Children and Families (DCF) sought and obtained technical assistance from the Harvard Kennedy Government Improvement Lab in constructing and executing an SIB project to address its greatest unmet service need at the time— parent and caregiver substance use, according to DCF Chief of Staff Elizabeth Duryea. … In 2015, Cuyahoga County, Ohio, became the first U.S. county to institute an SIB-funded program with a similar mission to Connecticut’s SIB-funded project. The county’s Partnering for Family Success Program seeks to reduce the amount of days children spend in foster care, which was one of the more expensive items in the county’s budget. …

How Goldman Sachs could pay for Minnesota’s public preschools

Source: Josh Verges, Pioneer Press, January 10, 2017

In its push for high-quality preschool, Minnesota could turn to investment bankers and philanthropists for the upfront capital that lawmakers have been reluctant to provide. If preschool later proves to save the government money, whether on unspent special education services or by other markers, the investors would get back their seed money and potentially much more. The model, known as Pay for Success, was pioneered in Salt Lake City, where the investment bank Goldman Sachs and the Pritzker Family Foundation received their first preschool payouts in 2015. Sen. Orrin Hatch, R-Utah, succeeded in inserting the concept into the federal government’s new education policy law. The Minnesota Department of Education recently was awarded one of the first grants, worth $397,000, to explore the feasibility of using Pay for Success to fund early-childhood education. … Minnesota is looking to Pay for Success not for expanding preschool but for boosting the quality of existing public preschools that serve mostly low-income students. Officials are proposing a broad expansion of the so-called Pyramid Model, now used in only about 100 Minnesota classrooms. The framework offers increasing levels of support to children who need it and has been shown to boost social-emotional and academic skills. By training teachers and providing classroom materials and expert coaching, the department hopes to start thousands of 4-year-olds on a path for lifelong success. … The Minnesotans involved in the project also are looking at a long list of markers of success. Besides special education placement, they said they might track attendance and suspension rates, scores on social-emotional assessments and third-grade reading tests, and even teacher retention. Temple said that Pay for Success programs are administratively complex, and that it will be difficult to assign a monetary value to each outcome they intend to track. … The greater challenge, Forsberg said, will be figuring out who will pay those investors back. Quality preschool would figure to benefit many levels of government. Individual school districts and the state would save money if fewer students needed special education services. And if those students succeed in school and life, they won’t burden counties with the costs of incarceration or various social services. …

Illinois Launches Pay-For-Success Initiative For Dually-Involved Youth

Source: Open Minds, January 3, 2017

On November 18, 2016, the Illinois Department of Children and Family Services (DCFS) announced the launch of a four-year, pay-for-success pilot project for youth dually involved with the child welfare and juvenile justice systems. The goal is to reduce or prevent time in institutional care, discourage repeat criminal behavior, and foster successful transitions to adulthood. Outcomes of the treatment group will be compared to a control group. To launch this project, DCFS contracted with Conscience Community Network LLC (CCN), a network of six Illinois non-profit provider organizations to deliver intensive care coordination and timely access to . . .

S.L. County launching 2 programs serving at-risk homeless, repeat offenders

Source: McKenzie Romero, Deseret News, December 19, 2016

After two years of preparation, Salt Lake County is ready to launch two data-driven and results-based programs addressing persistent homelessness and treatment for men at risk of repeated trips to jail. Calling the plan a “new frontier” for delivering essential services while safeguarding taxpayer interests, Salt Lake County Mayor Ben McAdams said $11.5 million will go toward two projects kicking off early next year with the goal of eventually serving an estimated 550 people. The launch comes just days after Salt Lake City Mayor Jackie Biskupski announced the locations of four new homeless shelters to be established around the city, and the eventual closure of the Road Home facility, operated by one of the two nonprofit organizations partnering in the county program. … In January, the Road Home will begin work on its Homes Not Jail project, which will provide a place to live for those who have been homeless for 90 to 364 days in hopes of keeping them from becoming homeless for much longer. The program is expected to serve 315 people. … Later in 2017, First Steps House will receive funds for its “REACH” initiative, which aims to provide comprehensive intervention, support and treatment for an estimated 225 men who have been incarcerated and are becoming repeat offenders. The acronym REACH stands for recovery, engagement, assessment, career and housing. …. Support for the “pay for success” programs has come from the Gail and Larry H. Miller Foundation, the Ray & Tye Noorda Foundation, the George S. and Dolores Doré Eccles Foundation, Living Cities, Synchrony Bank, Zions Bank, Northern Trust, QBE Insurance Group Limited, Ally Bank and the Reinvestment Fund. …

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Salt Lake County budget up for public hearings, with focus on ‘Pay for Success’
Source: Mike Gorrell, Salt Lake Tribune, December 4, 2016

Two public hearings are on the Salt Lake County Council’s agenda Tuesday. The first, at 4 p.m., will seek public comment on Mayor Ben McAdams’ proposal to invest $3.75 million in two “Pay for Success” programs, one aiming to reduce homelessness, the other to lower jail recidivism. … The council wants to apply $500,000 to extending substance abuse and mental-health treatment services from April to July for people entered into programs through the recent Operation Diversion roundups in downtown Salt Lake City. That joint county-city effort is aimed at curbing illegal drug trafficking by arresting dealers and diverting addicts into treatment. Another $250,000 would be dedicated, in the council plan, to an initiative to combat opioid abuse. The county district attorney’s office helped kick off the effort earlier this fall, providing funding to equip Unified Police Department officers with anti-overdose kits. The Pay for Success plan is a key piece of both McAdams’ budget, which does not require a tax increase, and his multiyear plan to address criminal-justice reform by attacking its root causes. … Both programs are designed to achieve specific success rates based on a variety of criteria. If the programs reach those benchmarks, the county will repay the investors with interest. If they don’t succeed, the county has no repayment obligations. Nelson told the council that four senior lenders would invest up to $6.5 million:

• Northern Trust Bank in Chicago.
• Ally Bank in Midvale.
• Reinvestment Fund, a Philadelphia-based “catalyst for change in low-income communities.”
• QBE Insurance from Australia.

Another $2 million in subordinate loans have been pledged by the Sorenson Global Impact Investing Center at the University of Utah and New York City-based Living Cities, a collaboration of foundations and financial institutions dedicated to low-income urban residents.