Feds Put $76 Million in Play to Support ‘Pay-for-Success’ Projects

The U.S. Department of the Treasury. Photo courtesy of iStock.

 The U.S. Department of the Treasury has made $76 million available for projects that give state or local governments a free trial of promising programs in key social services areas, including child welfare and juvenile justice.

The department put out a notice of funding availability late last month to support so-called pay for success (PFS) projects – $66.3 million for the programs, and $9.9 million to finance independent evaluations of the work.

PFS projects, also known as social impact bonds, offer governments a sneak peek at the impact of evidence-based interventions and services before they (hopefully) commit to embedding them in policy. Private money is put up to fund the services with agreed-upon benchmarks for success. If the marks are met or exceeded, funders get their money back with potential bonuses. If the benchmarks are not met, the government doesn’t pay a dime.

Last February, as part of the federal spending agreement that also saw the passage of the Family First Prevention Services Act, Congress and President Trump signed off on $100 million to back PFS projects around the country.

The Obama administration used its Social Innovation Fund to help pay for feasibility studies. The Treasury program, which was sponsored legislatively by Sen. Todd Young (R-Ind.) and former Rep. Patrick Tiberi (R-Ohio), is by far the largest single investment in these ventures since they started to take hold in the United States a little over five years ago.

Treasury officials said in the notice that it expects to make between five and 15 grants under this round of funding. Applicants must be state or local governments, representing a larger partnership for the PFS, and the proposed project period must be fewer than seven years.

Interested parties must complete a notice of intent to apply by April 8.

The first PFS venture in the United States got off the ground in 2013, and aspired to lower the recidivism rate of teens and young men who were incarcerated at Rikers Island. That project, supported mostly by Goldman Sachs, did not meet its outcome benchmarks and was shuttered in 2015.

There are about two dozen PFS projects ongoing in America now, with many others in the planning phase. The U.S. represents a small fraction of the overall number of projects in the world – about 20 percent – but accounts for about half of the dollars put into PFS work.

Among the ongoing PFS projects:

The funds announced last month by the Treasury Department are for PFS projects that are in the implementation phase, presumably with some private capital and agreed-upon benchmarks in place. Eligible projects must focus on one or several of 21 eligible outcomes, including:

  • Improving birth outcomes and early childhood health.
  • Increasing the number of children living in two-parent households.
  • Reducing the number of children living in foster care and returning to foster care.
  • Increasing graduation rates.
  • Increasing employment rates among youth and young adults.
  • Reducing reliance among low-income families on the social safety net.

Department officials said it plans to put out a smaller competition that will seed feasibility studies for a new slate of PFS projects, likely also in 2019.

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John Kelly, Editor in Chief, The Chronicle of Social Change
About John Kelly, Editor in Chief, The Chronicle of Social Change 1213 Articles
John Kelly is editor-in-chief of The Chronicle of Social Change. Reach him at jkelly@chronicleofsocialchange.org.