‘Pay for Success’ changes the way government invests

 

This week, the U.S. Senate Finance Committee is holding a hearing that covers legislation promoting the use of public-private partnerships to support innovation in government. The legislation – sponsored by Utah Sen. Orrin Hatch along with colleagues from both political parties – promotes efforts to improve government accountability and the delivery of evidence-based policies and programs.

Evelyn Johnson
Evelyn Johnson

The “Social Impact Partnership Act” (S1089) is federal “Pay for Success” legislation similar to the legislation that the Idaho Legislature approved in 2015. “Pay for Success” is a funding model that drives innovation by supporting evidence-based, effective programs with proven results. This model enables high-quality service providers to partner with both private investors and government agencies in order to find new ways to achieve desired outcomes for critical social services.

Wyatt headshot[1]
Wyatt Schroeder
Here’s how “Pay for Success” typically works: private capital is provided to cover the up-front costs of innovative programs designed to achieve specific, pre-determined social outcomes, such as improved reading scores for kindergarten students or reduced recidivism rates for teenage criminal offenders. An independent evaluator then conducts a rigorous analysis of the program outcomes to determine whether the service provider met those specific, predetermined metrics. If the exact outcomes are achieved—and only if they are achieved— government then pays back private investors the money it would have spent to try to achieve the same outcomes. If outcomes are not achieved, taxpayer dollars are off the hook.

“Pay for Success” is changing the way we think about how governments can invest scarce resources, measure success, and work with the private, academic, and non-profit sectors to do something better than government could ever do alone – innovate. Moreover, we have entered a new era of funding for non-profits and social programs. Donors are tired of just giving money and hoping that services are delivered. Instead, they want to know that their money has a real and sustained impact in the community.

Last year the Idaho Legislature recognized the opportunities “Pay for Success” can provide and authorized the State Department of Education to explore the model. The legislation makes Idaho a national leader in advancing innovative social impact financing models and in promoting their use to overcome longtime challenges and roadblocks in government.

One roadblock is that state and local government cannot always tap federal funding for “Pay for Success” projects. The legislation being considered by the U.S. Senate Finance Committee provides a system through which that roadblock can be torn down. This legislation allows the federal government to more frequently contract with state and local governments to engage in these innovative public-private partnerships and provide state and local governments with money to pay for positive outcomes. We hope that Idaho Sen. Mike Crapo, who serves on the U.S. Senate Finance Committee, will consider supporting this legislation so we can bring additional evidence-based services to people in need in Idaho.

The Social Impact Partnership Act would be an important step for the federal government to join states in utilizing these innovative approaches to help solve some of the biggest problems facing our communities. This legislation is fiscally responsible, pushing both service providers and government agencies to focus on actually achieving important outcomes rather than just raising or spending money. It’s a model Idaho believes will work, and we hope Congress will agree.

Written by Evelyn Johnson, executive director of the Lee Pesky Learning Center, and Wyatt Schroeder, executive director of Charitable Assistance To Community Homeless, Inc. (CATCH, Inc.)