Two interesting reads today with a good overview from Sean Hicks and a discussion from Ottawa about the mechanisms and how they may help…
(As always we love links to new bonds so please do send them through, we are endeavouring to expand to include more data on new issues as well as existing bonds!).
Enjoy your read:
SIBs: Innovative Public Finance Or Pie in the Sky?
Sean Hicks – Committee for Economic Development
Social impact bonds (SIBs), a unique approach to public finance that is gaining momentum in states and municipalities across the country, could alter the way major social problems are addressed by increasing the role of business and private individuals, while allowing governments to avoid spending taxpayer dollars on inefficient programs. According to an annual survey conducted by the public relations firm Edelman, Americans’ trust gap, defined as the difference between the trust in business the trust in government, is at a near-record high of 21% (58% for business and 37% for government). Cost savings aside, social impact bonds provide an opportunity to close the gap, and raise the public’s level of trust for both sectors.
Not quite a “bond” in the traditional sense, a social impact bond—also known as “social innovation financing” or “pay for success”—can be more accurately thought of a as a results-based public-private contract undertaken to solve a specific social problem. In the traditional case, a government sets out to solve a social issue, usually one that is combated by preventive programs, such as prison recidivism or homelessness. The government then enters into a contractual agreement with an intermediary (bond-issuing organization) that is tasked with raising capital for the project and finding service providers (typically nonprofits). Before the project is carried out, the government details measurable outcomes to be monitored by an independent evaluator. If the outcomes are met, the government repays the investors after the fact at a rate of return based on anticipated future savings to the government from having the problem nixed. However, if the outcomes are not met, the government does not pay the investors a dime. See the infographic below for a visual explanation.
‘Pay For Success’ Initiative Charts New Course For Crime Prevention
Don Butler – Ottawa Citizen
Molly Baldwin has seen the future of crime prevention — and according to her it doesn’t look anything like the punitive model beloved by the federal government.
Baldwin, who will address a national symposium on policing and community partnerships in Ottawa Wednesday, is founder and chief executive of Roca, a Boston non-profit organization with a proven track record of reducing incarceration rates among the highest risk young males.
In January, her organization was chosen by Massachusetts as service provider for an unprecedented “pay for success” initiative aimed at reducing recidivism and improving employment prospects for up to 1,320 Boston-area males age 17 to 23 at high risk of re-offending.
Under the seven-year initiative, private funders such as Goldman Sachs and various foundations will provide $18 million in up-front funding and Roca will defer $3.26 million in charges — 15 per cent of its service fee.
Massachusetts will repay them only if the initiative reduces the number of days the young men spend in jail and improves their employment and job readiness.