Innovative Financing and Focus on Outcomes: Dec. 4 forum

CAHS is always interested in the potential for CT to improve outcomes, and to better offer services that advance our mission of ending poverty by empowering, equipping and engaging people to build a secure future.

Given the ever-increasing state budget shortfall, one area we are looking at is  innovative financing methods such as Social Impact Bonds, or SIBs.

SIBs are generating a lot of enthusiasm for their ability to generate private investment in public services, and to bring a new emphasis to both accountability and population-level results. They were piloted in England where they have been in use for a couple of years to fund services to reduce prisoner recidivism.

The concept is that private investors fund programming that will save society money, and they get back their money, and a profit, if and when their services produce the agreed-upon result – say, reduction in prisoners going back to jail.  This offers the opportunity to offer needed services,  gauge results based on population-level impact, break down the silos that divide and fracture programming, and allow funding to be combined over multiple years.

In the US, New York City has recently begun a program, funded by Mayor Bloomberg, and Massachusetts has just awarded two grants for SIBs to address chronic homelessness and juvenile recidivism. In CT, the Department of Correction applied to the US Department of Justice to use SIBs for programming to reduce prisoner recidivism in Bridgeport and Waterbury. That grant was not awarded, but interest remains.

There are other new and innovative ways of financing generating similar interest. One intriguing model model is Human Capital Performance Bonds in Minnesota.

CAHS is working with the Capital Region Council of Governments  and Community Impact Strategies to host informational conference December 4. These and other models will be explored and you'll have the opportunity to ask questions of the people using these models in Massachusetts.

Some are concerned, and say these new financing methods would lead to undue profit for the private sector, or letting the state walk away from its obligation to fund human services.

Certainly, caution and oversight is warranted and needed. The incentives need to be carefully crafted and reflect the public interest.

But they offer the chance for our systems to recognize the value added by preventative services - the return on investment when we provide effective preventative services that prevent future increased costs to the state.

The Minnesota pilot identifies these goals:

"....using bonds to finance social services is an implicit recognition by the state that benefits often accrue over a number of years. (emphasis mine)

"For example, we don’t educate 5-year-olds because we hope they’ll be contributing members of society by the time they are 7. Currently the state tends to underinvest in social services, because budgeting rules recognize payback periods of only two to four years.

"Second, budgeting tends to take place inside strict silos, carefully guarded by state agencies. But as the work-force training example showed, costs and benefits are spread over many agencies. The Department of Employment and Economic Development pays for the services. The Departments of Human Services and Corrections see reductions in spending as a result. And the state’s coffers grow from increased tax revenue.

"Human Capital Performance Bonds provide a way of accounting for these costs and benefits. For the first time, the budgets of disparate state agencies will be considered from a single point of view — service providers’ impact on those budgets — and adjusted accordingly. This will help public agencies see and act upon the bigger-picture impact of human services.

"Finally, the focus shifts from activity to outcomes. How can we identify and fund those services that contribute to the health of our communities over the long run? Government budgets are notorious for funding activities (i.e., seat time for school children) rather than outcomes (how much they learned)."

Here are some other links on emerging financing methods that may be of interest: From Governing Magazine and a recent summary and history from the New York Times

Stay tuned for more news about the December 4 informational conference.


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