Of urban blight and other potential reforms, two good stories for today’s SIB News, so without further ado…happy reading:
Eight Sobering Thoughts for Social Impact Bond Supporters
Rick Cohen – NPQ
At the Council on Foundations’ annual meeting, during a plenary on the state of philanthropy, White House social innovation and civic participation director Jonathan Greenblatt touted the potential of “social impact bonds,” or, in the Obama administration’s nomenclature, “pay for success.” It’s hard to imagine a concept that has taken off quite like social impact bonds—which aren’t actually bonds, but more like equity investments in social problems with a government payout of costs plus an investment return if the programs meet predetermined outcomes.
Given that there are only four social impact bond projects underway in the U.S., the hoopla for SIBs is something else. SIBs might be an interesting tool for attracting private capital for the multi-year capitalization of a variety of social programs, but so far they have been rather narrowly focused on efforts to reduce prison recidivism (New York City), increase employment—and reduce recidivism—for former incarcerated persons (New York State), reduce youth recidivism (Massachusetts), and promote early childhood education (Utah).
None of the U.S. examples, nor the prison recidivism project from the UK, have even reached their first payment points, but that hasn’t tempered advocates from imagining all kinds of SIB uses. Just yesterday, for example, two researchers opined that social impact bonds could solve the nation’s urban blight crisis, by privately financing through SIBs “promising intervention(s)” that would “improve blighted spaces and yields [sic] savings” in “reduced police, fire, and public welfare costs.”
Two of the authors of that SIB blight idea, John K. Roman and Kelly A. Walsh, are among the four authors of a new study from the Urban Institute, titled Five Steps to Pay for Success, that focuses on projects aimed at improvements in the juvenile and criminal justice systems. Like other reports that have been issued on SIBs, particularly instructionals from the Rockefeller Foundation (A New Tool for Scaling Impact and an exuberant SIB infographic), the Urban Report is enthusiastic about the SIB potential and detailed in its description of how SIBs work.
How Government Can (Finally) Start Paying For Success
John Roman – The Huffington Post
Government doesn’t always work as well as it should, but there are solutions. We released new research on the five steps to implementing a pay for success (PFS) project. This is a new concept that can break through traditional barriers to government efficiency to help deliver social programs that produce a public good, government savings, and private profit.
Injecting private capital into the public sector addresses the problem of widespread underfunding of public sector interventions and innovations. PFS, social impact bonds (SIBs), and scaled finance are all similar models that share a core concept: using private capital to buy outcomes, while promising a profit if the program is successful.
Today, government pays for programs regardless of whether they work, and bears all of the risk of that investment. PFS transfers risk from the government to the private sector — philanthropy, venture capital, or commercial banks. In a PFS deal, government only pays if the program achieves predetermined outcomes.