Mark S. Innocenti Mark.Innocenti@USU.EDU Using Social Impact Bonds to Fund Programs for People with Disabilities Mark S. Innocenti Mark.Innocenti@USU.EDU AUCD Annual Meeting Washington, DC December 6, 2016

Social Impact Bonds (SIBs) or Pay for Success (PFS) An approach to contracting for intervention programs Payment tied to measurable outcomes Ensures high-quality, effective services for individuals and communities Other names: Development Impact Bonds, Payment by Results

PFS Analogy – The Transaction Resolution Results if successful For you Total cost: $150 Total savings: $200 Net benefit: $50 Longitudinal benefits: $? For me Total cost: $120 Total income: $150 Return on investment: 25% Results if unsuccessful Back to the old bulbs Stuck with new bulbs and costs

How does PFS work? Business and other organizations work with government and community agencies to: identify evidence-based programs Identify the outcomes they produce assign costs to program implementation and outcomes Investors provide capital to get started Bond is developed Program implemented Payments made to investors when outcomes are met

Impact Bond Mechanics EBP Identified Bond Developed Gustafsson-Wright & Gardiner, 2016. Using Impact Bonds to Achieve Early Childhood Development Outcomes In Low- and Middle-income Countries. Global Economy and Development Program – Brookings Institute

Types of currently funded PFS programs Recent review by Brookings Institute Social welfare (21 programs) Employment (17) Criminal recidivism (4) Education (4) Health (2) Being used across the globe What is missing? Gardiner & Gustafsson-Wright (2015). Brookings Institute

Why PFS? Federal Legislation – Social Impact Partnership Act (H.R. 5170 passed, S. 1089 introduced) Senator Hatch discussed impact investing for people with disabilities in a Senate Finance Committee Meeting White House OMB – Brief on PFS Since 2013 – 26 states have introduced or passed legislation allowing or encouraging PFS transactions Corporation for Supportive Housing brief on SIBs for meeting Olmstead U.S. DOE RFP competitions focused on PFS U.S. DVA–PFS RFP on employment rehabilitation Illinois DHS-PFS RFP focused on supportive housing, community capacity, workforce (all disability focused)

Benefits of PFS Encourages business and other investors to become more involved in social prevention programs Increased focus on program outcomes rather than process Programs can focus on what works and not on paperwork compliance Builds a culture of monitoring and evaluation Drives performance management Foster collaboration between the for profit, nonprofit, and government sectors collaboration across government agencies, levels of government, and political parties Government only pays for programs that achieve outcomes; risks are borne by the investors. Communities are able to provide more successful options for children and families Outcomes that matter!

Example: Utah High Quality Preschool Program (Utah PFS Program) First Preschool PFS project in the U.S. Involvement beginning with conceptualization Basic idea – improve outcomes for low-income children who come from families with multiple risk factors

Utah PFS Program Facilitating Factors Granite School District (GSD) serves a low-income demographic with families who have multiple-risk factors GSD history of providing preschool for low-income families Approximately 25% of children receiving preschool services score 2 standard deviation below the mean on the Peabody Picture Vocabulary Test Few identified for special education Consistent with Baby FACES findings Evidence for program success Immediate Longitudinal

Utah PFS Program Bond Considerations Evidence based model in place Large percentage of children scoring very low on standardized language measure Language skills are one of the best predictors of later school success Poor academic performance in kindergarten best predictor of later special education placement (Hibel, Farkas, & Morgan, 2010) Very low performing preschool children more likely to need special education once in school

Utah PFS Program Bond Development Enroll group of children in evidence-based preschool model Identify 20 to 25% with very low performance on language measure (payment cohort) Provide high quality preschool to all children Pay for special education avoidance Follow children through 6th grade

Utah PFS Program Participants Goldman-Sachs JB Pritzker Foundation United Way of Salt Lake United Way (initially) State of Utah GSD Other preschool providers Utah State University Low income, high risk preschoolers Gustafsson-Wright & Gardiner, 2016. Using Impact Bonds to Achieve Early Childhood Development Outcomes In Low- and Middle-income Countries. Global Economy and Development Program – Brookings Institute

Utah PFS Program Implementation Enroll: 1000 low income, at-risk 3 and 4-year old children Investors pay for these preschool program slots Evaluate: All children at pre and post Identify payment cohort: Approximately 20 to 25% at high risk (2 SD below mean) Longitudinally follow: Payment cohort for special education placement - K through 6th grade Payment: Pay for each payment cohort child who does not enter special education

Utah PFS Program Benefits Increased collaboration between government, investors, and nonprofit organizations Funds quality preschool for some low income children in Utah Led to increased funding by the state legislature for low income Utah children Outcome focus included in legislation

What’s next for the disability field? Identify disability intervention programs that have measurable outcomes Transition, housing, health and wellness, community support Identify costs for the intervention and costs saved Identify investors – government or private Develop a bond Start the process Resources are available for feasibility studies, for developing bonds, for identifying investors University of Utah Sorenson Center, Harvard Kennedy School of Government Third Sector, Institute for Child Success, Nonprofit Finance Fund