Pay for Success Report: So Far, Lots of Interest and Slow Movement

As The Chronicle continues to follow the development of Pay for Success (PFS) projects (also known as Social Impact Bonds), other interested parties have begun to take notice as well. There have been a number of recent reports published on PFS, including the examination of winning federal grant applications The Chronicle reported on late last year.

Last month, Canadian research group, Canadian Centre For Policy Alternatives, released a report co-authored by John Loxley and Marina Puzreva from the Economics Department of the University of Manitoba. The report, Social Impact Bonds: An Update, examines the state of PFS globally and presents critiques of the model to consider.

A few takeaways from the report:

More Projects in U.K., More Invested in U.S.

The report begins by providing several useful data points. The authors identify that there are currently 23 projects being implemented or very close to implementation around the world. The U.K. and the U.S. continue to be the front runners. Australia currently has two projects and the Netherlands has one in the implementation phase.

The majority of established projects are located in the U.K.; 15, to be exact, compared with just four in the implementation stage in the U.S.. But the average size of projects in the U.S. is much larger than the U.K., so the amount of money involved in total is greater in the U.S. To date the U.K has $54.5 million invested in various PFS projects and the U.S. has $57.1 million invested in its projects.

The report broke down the financial commitments by issue area. Forty-five percent of the projects are in the criminal justice field, including services related to the criminal and juvenile justice systems. Programs targeting children account for 29 percent, interventions around employment account for 13 percent, home care accounts for 7 percent and projects targeting homelessness account for 6 percent.

What’s the Holdup?

The authors make an astute observation when it comes to implementation of PFS. They attest that there are at least thirty programs in the works, but pose the question: why have so few moved toward implementation?

Loxley and Puzyreva believe that the holdup may have to do with the prior development PFS requires to get them off the ground. The authors observe that “the need for prior development of background supports for these activities in terms of legislation, government policy, budgetary practices and institutions and lobbyists promoting and enabling SIBS” is the root cause for the delays.

Interest Mounting on the Local Level

Even if talk has not turned to action in most cases, there has been a significant uptick in the number of states and local governments interested in PFS. To wit:

  • Maryland and Utah are reviewing legislation
  • Hawaii, New Jersey and Minnesota passed legislation enabling SIB pilot projects
  • Pilot projects or feasibility studies are underway in California, Ohio, Oregon, Rhode Island, and Washington, DC
  • Request for information has been issued by:
    • The city of Denver for early education, at-risk youth, supportive housing and homelessness prevention
    • The state of Illinois around youth justice and employment
    • The state of Michigan around criminal justice and human services
    • The state South Carolina around the health of mothers and their babies
  • Request for Proposals have been issued by
    • The state of Connecticut for a child welfare/substance abuse program
    • The state of Massachusetts for chronic homelessness and juvenile justice programs
    • The state of New York for health care, child welfare, early childhood development and public service programs

Will This Work?

There are only six completed projects and among those six, data for only two–both in the U.K. Loxley and Puzyreva make their weariness evident, specifically when looking at outcomes from the first SIB project in the U.K. – Peterborough prison, a recidivism-focused intervention.

Although the Peterborough project reduced the number of re-convictions by 8.39 percent, the reduction was not sufficient to meet the terms in the contract and did not trigger payment yet. There is still a chance the investors will get their money back in 2016 after the second cohort of participants finish the program.

The authors believe there are issues to consider when evaluating programs, such as selection bias or whether the same results could have been achieved with a conventional delivery method. The authors also stress the importance of not concluding too much from such a small sample size.

At the conclusion of the report, Loxley and Puzyreva leave the reader with some lingering questions about the future of SIBS and the values they represent.

The authors point out the opposition voiced by the Alberta College of Social Workers to the model. From Alberta President Lori Sigurdson:

“We don’t want people to profit from the misery of others. The motive becomes profit, not service. The primary responsibility of government is to support vulnerable and marginalized people.”

Click here for the full report.

Judith Fenlon is the Editor of the Money and Business Section of the Chronicle of Social Change.

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Judith Fenlon
About Judith Fenlon 165 Articles
Money & Business Editor for The Chronicle of Social Change