HuffPo gets into SIBs or “Pay for Success” and clearly while there is not enough empirical data yet to prove anything, the omens are very encouraging…
Paying For Success, Getting Results
Over the next year, the federal government intends to expand the use of a promising tool for funding social programs that could deliver better results. This tool, called “Pay for Success,” has the potential to deliver better outcomes at lower cost for taxpayers through government partnerships with philanthropic and private sector investors.
Pay for Success is one of a number of innovative, outcome-focused efforts that the federal government’s Office of Management and Budget (OMB) encouraged agencies to consider in recent guidance. Calling on agencies to deliver a smarter, more innovative and more accountable government and to draw upon existing credible evidence in formulating budget requests, agencies were told that “requests are more likely to be fully funded if they show a widespread commitment to evidence and innovation,” signaling that, in no uncertain terms, the days of blindly funding programs are numbered.
So how does Pay for Success work? Instead of spending money in advance on a program with uncertain results, the government identifies an outcome or a goal — such as reducing prison recidivism among young people or reducing homelessness — and investors along with private funders provide the initial capital support to implement an evidence-based program with potential for better results and savings to the government. Only after the predetermined outcome has been achieved does the government spend any money. Through this funding tool, governments at the local, state and federal levels can begin to deliver better results, while also limiting the risk of wasted taxpayer dollars.
Why is this especially important now? With resources increasingly scarce, governments need tools to help them make better choices about how limited funds should be spent. At a time when Congress and many states across the country continue to implement blind, across-the-board spending cuts, funding tools like Pay for Success can ensure that taxpayer dollars go to programs that are demonstrating results. Even more importantly, the Pay for Success approach creates a default mechanism so that programs that are not producing the intended results are automatically ended. A simple concept, but as anyone who has worked in government knows, it isn’t easy to end a failing program because of politics, bureaucracy or just plain inertia.