Healthy dialogue is the order of the day as always, and indeed explicitly so from the comments by Jane Hughes and Elisa Helbitz in the NPQ journal as well as a discussion in the Deseret News notes. Happy reading:
Social Impact Bonds: Healthy Dialogue On A Young Sector
Jane Hughes & Alisa Helbitz – Nonprofit Quarterly
Those of us with Google Alerts tuned to Social Impact Bonds, or SIBs, have found our in-boxes busier than ever in recent weeks. Toward the end of April, the UK government announced that the world’s first SIB, at Peterborough prison, would wind down early because the government would be financing the program itself starting in 2015. Barely a week later, there were Senate hearings on SIBs, which we found to be both balanced and intelligent, so we were surprised to discover that Rick Cohen seemed to have a different impression.
Now seems like a good opportunity to reflect on questions and concerns regarding SIBs. We at Social Finance share some observers’ worry about the gap between the hype and the reality of SIBs. Senator Angus King’s question, voiced at the Senate hearings, “Why doesn’t the government try to get it right?”—instead of financing social programs with private capital—resonates with us as well. And we understand Senator Kelly Ayotte’s puzzlement when she wondered aloud why the Massachusetts SIB involved $12 million in private capital but $27 million of outcome payments.
We view this as part of a healthy dialogue on an innovative and new mechanism to re-imagine the role of capital markets in social services; we welcome and even share many of these questions and concerns. The Senate hearings were an important part of this dialogue, in which senators posed questions that deserve a more thorough response than the limited time frame and format of the hearings allowed.
Paying for initiatives in public education has traditionally required a tax levy or issuance of bonds backed by government entities, but a new experiment in Utah involving a public-private partnership is attracting national attention as an innovative means of alternative financing.
The Granite School District has partnered with the investment firm Goldman Sachs to issue the first so-called “social impact bonds” to pay for a public education program — in this case, the expansion of the district’s successful early child education program. An article in the Deseret News National Edition points out the partnership is nearly unprecedented and will be observed as an experiment of sorts in the use of private capital for financing a public policy venture.
Goldman Sachs and investment partner J.B. Pritzker committed to invest $7 million in the Utah High Quality Preschool Program, which provides targeted curricula for 3- and 4-year-olds in hopes of preparing them for academic success. The United Way of Salt Lake, also a partner in the venture, will oversee the influx of money.