Pay for Success Watch: Los Angeles County to Explore Options

The Los Angeles County Board of Supervisors voted on Tuesday to move forward with a plan to explore the feasibility of a “pay-for-success” model to fund social services in the county.

The supervisors approved a recommendation from the office of Los Angeles County Chief Executive Officer William T. Fujioka to accept a $300,000 award from the California Pay for Success Initiative, which is designed to offer technical assistance and guidance for the county’s efforts to create a blueprint for pay-for-success financing.

Pay-for-success (PFS), also known as social impact bonds, is a relatively new model that leverages public-private partnerships to create funding for social services programs. Under the PFS model, the government pays service providers only if certain agreed-upon outcomes are achieved.

In recent cases, philanthropic capital and private investment firms have stepped forward to provide funding for anti-recidivism and substance abuse programs with the promise of generous returns if outcome-based goals are met.

The California Pay for Success Initiative Award from the Nonprofit Finance Fund earmarks $200,000 to consultant Third Sector Capital Partners, a key player in PFS efforts across the country. According to a report from Fujioka, the money would be spent to develop best practices for the pay-for-success financing and examine the initiative’s possible costs and benefits.

In Santa Clara County, Calif., Third Sector Capital Partners played a similar role in facilitating the pursuit of a pay-for-success model. After a feasibility study in 2013, Santa Clara County launched a pay-for-success project to reduce chronic homelessness with the help of the consultant.

Third Sector will also be involved with the two California PFS projects announced this month by National Council on Crime and Delinquency.

The county will spend the remaining $100,000 on data analysis and determining performance goals for the initiative.

Supervisor Gloria Molina has been an early supporter of PFS, but at the meeting on Tuesday she expressed some skepticism about the initiative’s financing.

“There are aspects of this program that are absolutely fabulous, but there is an outstanding aspect of this—how do we pay the investors?” she said. “Before we move forward, we need to have that answered.”

Once the feasibility study is completed with assistance from Third Sector Capital Partners, Fujioka said a blueprint for PFS models will be presented to the Board of Supervisors before moving forward.

Jeremy Loudenback is a Journalism for Social Change Fellow and a graduate student at USC’s Sol Price School of Public Policy.

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Jeremy Loudenback
About Jeremy Loudenback 309 Articles
Jeremy is the child trauma editor for The Chronicle of Social Change.