Pay for Performance in WIOA: An Opportunity for Innovation and Better Outcomes January 27, 2016

Moderator: Katherine Klem, White House Panelists:  John Colbert, Capital Hill Partners  Samra Haider, Center for Employment Opportunities  Jerry Croan, Third Sector Capital Partners Introductions

1.What is Pay for Performance? 2.Details of Pay for Performance 3.A service provider’s perspective 4.Resources to help you to use Pay for Performance 5.Q&A Overview

An approach that uses government dollars for outcomes, not inputs or outputs Allows states and localities to use WIOA formula funds for outcomes important to them – not on inputs What Is Pay for Performance?

Why Is Pay for Performance Important?

Details of Pay for Performance in WIOA John Colbert Capital Hill Partners

First permanent federal statutory authority embedding outcome based strategies WIOA Pay for Performance (PFP)

States can use any portion of their WIOA funds across all three funding streams for PFP Can also augment with non-federal funds Who can spend what?

Local areas can use up to 10% for PFP States can provide T.A. to WIBs on PFP Who can spend what?

No third party investor is required (though this approach is allowable) It is a direct contract between a state or WIB and a service provider These are not necessarily Social Impact Bonds

PFP is an opportunity for states and localities to develop projects directly with CBOs and other contractors focused on mutually negotiated outcomes Outcomes are negotiated

Payments are made if, and only if, specific outcomes are achieved Payments only upon outcomes

The financial risk to states and localities is de minimis, only paying for a provider’s successful outcomes Little risks to the states

States and localities can use PFP to create incentives for providers to successfully assist harder to serve participants such as: - Long term unemployed - Ex-offenders - Returning Vets - At risk youth Helpful approach in targeting the hard to serve

PFP contracts can reverse “creaming.” Successful placements of harder to serve participants mean larger rewards for contractors. Can be an “anti-creaming” approach

PFP can also be used to reward providers for meeting high bar outcomes Bonus payments allowable

WIOA – no limits for locals in the use of performance-based contracting Only 10% of local WIOA funds can be used for PFP Outcome-based approaches can be augmented by combining PFP with traditional performance contracts PfP can be combined with performance-based contracts

How? Traditional performance-based contracting provides pay points to contractors for reaching incremental milestones PFP funds can be used to provide bonus payments for reaching specific high bar outcomes PfP can be combined with performance-based contracts

States and locals have tremendous flexibility in the development of pay for performance contracts States and local WIBs can negotiate specific outcomes with contractors based on their state or regional workforce needs PfP offers great flexibility

The WIOA NPRM allows funds dedicated to PFP to be available until expended WIOA formula fund time limits are eliminated Allows contracts to be developed based on realistic timelines, so long as activity can be documented toward the contracted goals. PfP funding is “no year” money

If a PFP service provider does not meet its negotiated goals – no payment by state or local - Funds can be redeployed to successful PfP providers - Funds can be utilized for same or different outcomes - Choice is up to the state or local PFP can be redeployed

WIOA draft rulemaking allows new service providers eligible for funding PFP contracts can now be awarded to intermediaries, community based organizations, as well as community colleges Services providers do not have to be on a state’s Eligible Training Provider list Service Providers do not need to be on ETP list

Be bold – Act Now Include PFP as a workforce strategy in your WIOA state plan What can I do now?

A Service Provider’s Perspective Samra Haider Center for Employment Opportunities

RECRUITMENT LIFE SKILLS EDUCATION Participants attend a 4-day life skills education course TRANSITIONAL EMPLOYMENT All Life Skills Education graduates are placed into transitional employment on CEO work crews JOB COACHING Prepares participants to become “Job Start Ready” and eligible for placement services JOB DEVELOPMENT/ PLACEMENT Matches participant w/ potential employment opportunities JOB PLACEMENT Participants are placed into unsubsidized employment RETENTION SERVICES 12 months of ongoing support after placement including monetary incentives (Rapid Rewards) CEO Program Model

CEO is a Proven Solution to the Problem of Recidivism CEO had the best results with higher risk and recently released clients – those at the highest risk of recidivism Statistically significant reductions on all measures of recidivism Over 20% reduction in reconviction and returns to incarceration Over 3:1 Benefit: Cost Ratio Up to $ 3.30 saved for every tax payer dollar spent or $8,336 saved per person Public Safety Public Spending 1. These results were driven by those recently released from incarceration. CEO’s Impact on: In 2012, MDRC released the results of a three-year random assignment evaluation which showed that the CEO model reduces recidivism

PFS Lead Responsibilities – A Close Partnership CEOSocial Finance, IncNYS Project Design Implementation  Program design and implementation including  Performance management plan  Recruitment and retention  Provide high-quality services to participants  Convene and mobilize stakeholders  Cost-benefit analysis  Legal/contract framework;  Negotiation of SIB contract  Capital raise  Investor relations and ongoing reporting  Political alignment (legislature)  Agency alignment  Legislation for appropriation  Negotiate payments and PFS contract  Evaluation and related reporting  USDOL grant reporting  Appropriate funds Select Outcomes, evaluation design, data collection and analysis, reporting, SIB governance Active performance management Shared Develop PFS Contract, economic modeling

Resources to Help You Use Pay for Performance Jerry Croan Third Sector Capital Partners

© 2015, Third Sector Capital Partners, Inc. Third Sector is America’s leading practitioner of Pay for Success Mission Accelerate America’s transition to a performance driven social sector Who We Are Third Sector Capital Partners, Inc. is a 501(c)3 nonprofit advisory firm that collaborates with government, funders, and service providers to address social needs through Pay for Success initiatives Our Work Launched $28 million Massachusetts juvenile justice project Launched $5 million Cuyahoga family homelessness project 37 projects in development nationwide The only national full service advisor awarded a federal Social Innovation Fund grant: $1.9 million to support feasibility studies with state and local governments Our Team 32 team members Expertise across government, private, and nonprofit sectors

© 2015, Third Sector Capital Partners, Inc. WIOA Pay for Performance (PFP) & Pay for Success (PFS) WIOA Pay for Performance (PFP) is very similar in concept to Pay for Success (PFS), but with its own unique twists –May or may not involve funds from private sector investors –Must use WIOA performance measures (but could add others) –Does not require an intermediary (but could have one) –Built-in authority to make success payments, but still must follow appropriate regulations

© 2015, Third Sector Capital Partners, Inc. WIOA & Pay for Performance (PFP): State/Local Roles In general, WIOA’s PFP provisions are broad and delegate most authority to local boards. The states must publish performance outcome reports and evaluate PFP. States may provide technical assistance, and may provide contract incentives. PFP opens up additional opportunities for blending and braiding of funds with other State/local programs with different combinations of outcomes-based and traditional services-based contracts

© 2015, Third Sector Capital Partners, Inc. Third Sector is a proud grantee of the Social Innovation Fund Pay for Success Program Furthermore, Third Sector is thrilled to partner with:

© 2015, Third Sector Capital Partners, Inc. SIF Competition: Workforce Development Overview Third Sector is a hosting a competition to select up to five government Sub-Recipients that are focused on using Pay for Performance and the new WIOA legislation to increase outcomes for youth (ages 14-24). Who Should Apply? State Executive Offices, State Workforce Agencies, and Local Workforce Boards (highly recommended in conjunction with State Executive Offices or Workforce Agencies) who demonstrate clear interest in pay-for- performance exploration through their WIOA implementation plans or other actions. State Education Agencies, TANF Agencies, and service providers are also encouraged to partner with applicants. Preference will be given to state-level applications and applications across multiple jurisdictions Timeline 12/7Letter of Interest Released 1/4Application Released 1/12Webinar #2 for Potential Applicants 1/29Letter of Interest Due 2/19Applications Due End of March Sub-Recipients Notified JuneProject Kick-Offs

© 2015, Third Sector Capital Partners, Inc. Goals of the Competition  Support the testing and scaling of replicable, high-impact, longer- term youth workforce development strategies  Direct limited resources toward programs that work for the most vulnerable youth populations  Build pathways to attract additional public and private resources that will result in long-term improvements in employment and earnings.

© 2015, Third Sector Capital Partners, Inc. Third Sector’s Competition Offers the Following Resources 1.Up to $200,000 worth of services from Third Sector and implementing partners for a 12 month engagement to conduct feasibility of an outcomes-based contract in youth workforce development. 2.Participation in a multi-state learning community, including presentations, convenings and training workshops by partners, workforce development experts, and networks to create scalable workforce development contract blueprints. 3.Possibility for flexible capacity dollars to help cover costs of a decision- maker within the government jurisdiction to focus on pay-for-performance feasibility, as well as professional development training for budget, procurement, and data and evaluation staff. For more information, visit

© 2015, Third Sector Capital Partners, Inc. Our P4P Project Development Process Feasibility and Technical Assistance Conduct analysis to determine the necessary steps to implement a P4P project Partner with governments to design procurements for P4P providers and other project parts Services include: Assessing stakeholder readiness, prioritization of target populations, and identifying the value proposition for a project Project Construction and Financing Work with all project stakeholders towards executing the key elements of a P4P contract Services include: Managing project workstreams, financial structuring, economic modeling, multi-party contract formation, fundraising from philanthropic and commercial sources, and vetting of partnership stakeholders Project Launch and Management Support the project ramp- up/pilot and provide ongoing project advisory Services include: Consulting on project management, managing investor relations, monitoring project implementation, and convening oversight meetings ≈7-15 months≈9-12 months≈1+ year

© 2015, Third Sector Capital Partners, Inc. The main deliverable of the Feasibility Study will be a P4P blueprint Completed feasibility study P4P contract implementation plan (including how the participating governmental agencies will budget for, procure, execute, and fund P4P contracts ) Evaluability assessment Cost-benefit analysis and support Creation of funder interest groups (to promote interest in financing on- going P4P project construction needs and financing the P4P contract)

Questions and Answers