Pay for Success A Connecticut Overview

Pay for Success A Connecticut Overview January 2019 Innovative New Concept  Private investment funds needed human services  Government pays only for successful outcomes  Requires rigorous focus on measurement and outcomes Better Results Measuring Outcomes Funding “upstream” – preventing negative costs Social Impact Bonds (SIBs) are not bonds in the traditional sense, because payment is contingent upon achieving agreed goals that save the government money. The term Pay-for-Success (PFS) is used to describe transactions that emphasize outcomes over outputs, including Social Impact Bonds and similar projects. It can also be a way to structure traditional government contracts. Social Impact Bonds & Pay for Success Key Elements 1. High-quality preventative services 2. Rigorous measurement of results 3. Capturing savings or avoided costs Most projects attract private investment to pay for proven, high-quality preventative services. Focus areas include early childhood, workforce, housing the homeless, and others where program success avoids a future negative cost. Government, or other payor, only pays after agreed-upon outcomes, which will save money, have been attained. SIBs Began Very Recently The first SIB: 2010, Peterborough England An innovative new tool, created by investors, government, and providers, to increase impact.  Investors paid for comprehensive services with the goal of reducing re-offending for people who were incarcerated.  Services began pre-release and continued with participants into community. The program was voluntary but offered to all people with short sentences.  Outcomes closely and continuously tracked. Providers worked together in real time to change services as needed.  The reduction in re-offending exceeded the goal, and investors were repaid with interest. New Architecture: Pros and Cons  New parties are involved: Intermediary, investor & evaluator  Providers get stable funding for the life of the contract, usually several years  All parties get detailed and highquality data about what works, and how to improve services and outcomes  Projects are complex and initially take longer to structure  Government pays only for results achieved, which typically have avoided a negative cost. NEW NEW NEW “Classic” PFS / SIB Model All entities are engaged in planning and agree at outset to goals, metrics & timeline. Not for Everything… Needed Conditions 1. Potential for savings or avoided cost, attributable to government or other payor 2. Measurable outcomes that can be agreed upon by all parties 3. Defined population and intervention 4. Safeguards against harm for target population 5. Issue ranks high among government/payor priorities Pay for Success should NEVER replace a society’s safety net. PFS in the US Today Twenty projects are underway, addressing: • Homelessness • Early Childhood • Recidivism • Workforce • Early Childhood Education • Mental Health • Environment • Child Welfare Source: Nonprofit Finance Fund Pay for Success Hub payforsuccess.org Nearly 60 more are in the planning stages. Elements of PFS Lead to Improved Services… no matter WHO pays Pay for Success Continuum Conventional Contracting Complete Pay for Success Pays for SERVICES Generally limited capacity to collect and analyze data. Frequent re-bids; generally, limited provider input into service design. Payments from state do not necessarily cover the cost of providing services. Providers report on expenditures and services delivered. Little incentive for systems to share information on the people they all serve. Pays for OUTCOMES Rigorous, independent data collection inherent in program design. Data used continuously to make adjustments as needed to attain results. Leads to better data collection with benefits beyond PFS project. All parties - providers, government/payors, evaluators and intermediaries – integrally involved in negotiating contract and terms. Evaluators determine outcomes as agreed. Avoided costs/savings are identified and can be captured and reinvested. Systems encouraged and incentivized to share information. Why Bother with PFS? The CT Example. Connecticut’s non-profit sector struggles to provide core services…and the system is not able to attain population-level outcomes. CT nonprofit service providers:  50% reported deficits  5 th highest in U.S.  77%: payments don’t cover cost of service:  7 th highest in the U.S.  Many employees eligible for state assistance themselves. -Institute for the 21st Century Meanwhile: 53% of Hartford’s children are in poverty. Youth and adult unemployment, poverty overall, recidivism and other measures also unacceptably high. If you’ve seen one Social Impact Bond…. You’ve seen one Social Impact Bond. Transactions are inherently complex, involving numerous data systems and parties, and usually requiring them to develop and track new metrics. However, they can provide stable funding for services and prompt better use of data to improve outcomes. Ultimately, they can help government and the public learn and fund what truly works to improve communities. PFS in Connecticut Activity includes: • Office of Early Childhood: Outcomes Rate Card is applying PFS principles to child care providers. • CT Housing Education Finance Authority is working with Urban Institute to determine identify possible CT PFS projects, and is interested in developing capacity to act as an intermediary. • Department of Children and Families: Family Stability Project, launched n 2016, is a SIB providing Family Based Recovery to decrease parental substance abuse and increase family stability for DCF-involved families. Recent and Emerging Developments The 2017 federal budget created the Social Impact Partnerships Pay for Results Act (SIPPRA), creating the Evidence Based Policymaking Commission and mechanisms to use PFS to tackle social and public health issues. The legislation provides for a $92 million fund to be housed at the Department of Treasury. It highlights a wide range of outcomes eligible for the program, including improved child and maternal health, reduced homelessness, lowered rates of recidivism and increased youth employment. The key criteria is that outcomes must “result in social benefit and Federal, State, or Local savings.” The Treasury was instructed to publish request for proposals from states and localities in February 2019. Capacity and Interest Others now engaged in Pay for Success include: • Corporation for Supportive Housing • Urban Institute • MDRC • John Kaiser Family Foundation • LISC • United Ways (various) • National Council on Crime and Delinquency • Living Cities • Jobs for the Future • U.S. Corporation for National and Community Service …And numerous regional and national foundations, universities, school districts and other entities. Most Promising Focus Areas 1. Recidivism 2. Health Care 3. Workforce Development 4. Homelessness 5. Early Childhood Projects also address areas of environmental impact, foster care and substance abuse treatment. Lessons Being Learned: Ohio A series of public meetings explored available services against their potential for PFS. The resulting Partnering for Family Success Program provides housing and services to stabilize and reunite families weakened through poverty, illness or crisis, with the goal of reduced foster care and reunification. “This has resulted in our fiscal and administrative staff breaking down costs and expenses in a way we’ve never seen. We are also now matching administrative data sets that were never compared before: child welfare, homelessness, juvenile justice and adult jail systems.” ~David Merriman, Deputy Chief of Staff, Cuyahoga County Upstream Solutions Upstream Solutions supports programs and policies that lead to better individual and collective outcomes, and work that creates equity, social justice and positive systems change. Services include connecting interested stakeholders, communications and marketing, innovative financing, grantwriting and advocacy. A core focus is Pay for Success (PFS)/Social Impact Bond financing. Upstream Solutions works to promote understanding of PFS, and to ensure it is applied responsibly and benefits individuals and communities. Liz Dupont-Diehl (203) 667-5956, ldd001@gmail.com Upstreamct.org