Social Impact Bonds Creep into Federal Grants for Offender Reentry

The Chronicle of Social Change posted this Justice Department Request for Proposals, for addressing co-occurring substance abuse and mental health disorders in adult offenders, last week. It is a $600,000 award available to state and tribal governments.

It’s not normally a prospect we’d alert subscribers to, but there was nothing that specified that the clients had to be actual adults, just adult offenders. So a juvenile convicted in adult court could be served through this grant.

There was another thing about the RFP that caught Youth Services Insider’s eye: That Justice would give priority to applicants that crafted their proposal as a Pay for Success program, which is apparently what the Obama administration has decided to call Social Impact Bonds (SIB).

Social impact bonds, simply put, allow governments to let private dollars do the start-up work on good ideas and reward only success. Investors and philanthropists come up with the funding to initiate a new project, and, if said project achieves stated goals, the government pays them back with interest.

This is the first solicitation from the federal government that YSI has seen that seeks out and prioritizes Pay for Success plans, which is not to say there aren’t others we aren’t aware of.

Obama’s 2011 budget proposed $100 million for SIB projects, and included juvenile justice as a possible area, but Congress didn’t bite. So this is a bit of an end-around by the administration, turning what would be a regular grant competition into an SIB incubator.

It does appear from the description in this RFP, though, that the feds are only seeding a Social Impact Bond relationship between a state government and a state-level financing partner:

“Under this priority, Second Chance grants may be used to fund operations if 1) a state, local or other organization will pay for outcomes after they are achieved; or 2) to pay for outcomes achieved within the grant period.

In other words, it won’t be the Justice Department getting paid back, it will be the state paying the financing partner. This grant will just help the two local entities set something up.

Again, this is an RFP for work with adult offenders, so it isn’t likely that a lot of youth will be targeted by this project. But this is worth noting in that it’s another step forward for the SIB movement, which remains an exciting but completely unproven financial scheme.

For more on the backstory on Social Impact Bonds, click here to read YSI’s story from last August.

Youth Services Insider is mostly written by John Kelly, editor-in-chief of The Chronicle of Social Change

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John Kelly is editor-in-chief of The Chronicle of Social Change.