Pay for Success in the US: Current Activity and Interest Philip A. Peterson, FSA Partner, Aon Hewitt 610-256-7200 Sara Watson, MPP, PhD National Director ReadyNation Funded by the Pritzker Children's Initiative, a project of the Pritkzer Family Foundation

The Council for a Strong America 6,000+ High-level, Unexpected Messengers More than 4,500 attorneys general, district attorneys, police chiefs, sheriffs and crime survivors who educate policy-makers and the public that early investments in kids prevent later criminal activity. More than 1,100 business leaders who advocate for high-quality, research-proven public investments in children that strengthen businesses, protect America’s competitive edge in a global marketplace, and help our nation’s children get on the right track. More than 425 retired admirals and generals who argue that investing in kids is a national security issue. More than 250 evangelical pastors committed to the development of strong and healthy American families with a specific focus on those at risk. More than 160 athletes and coaches who work to ensure that every child has the best chance to compete in life. September 18, 2018

What is Pay-for-Success (PFS)? Combination of performance-based payments and market discipline to accelerate and scale innovative, evidence-based solutions for social services. Private Funders Investment 5. Principle + ROI Governments contract with private sector intermediaries who in turn partner with service providers, and private/public investors to fund prevention-focused social programs. Governments pay and investors are repaid only if and when agreed-upon performance outcomes are achieved and verified through an independent evaluation process Intermediary Government 4. Performance-based payments 2. Working capital Service Providers 3. Outcomes & budget savings Source: Presentation, “Ohio Pay-for-Success.” The Ohio Business Roundtable. 2014. September 18, 2018

Pay for Success in the US Deals in Early Stages State has an active social impact bond underway State is exploring Pay for Success options Source: Kristina Costa. “Fact Sheet: Social Impact Bonds in the United States.” Center for American Progress. 2014. September 18, 2018

State and Local Jurisdiction Activity Active Deals in Progress New York City First social innovation financing project in US Goal: Reduce juvenile offender recidivism Required outcome: Reduce readmission rate at least 10% Financing: Loan (Goldman); partial loan guarantee (Bloomberg) Utah – Salt Lake County First early childhood project in US Goal: Reduce use of special ed/remediation services Required outcome: Avoidance of special education/remediation costs Financing: Senior (Goldman); subordinate (J.B. Pritzker) debt September 18, 2018

State and Local Jurisdiction Activity Active Deals in Progress Massachusetts Goal: Reduce recidivism; improve employment outcomes Required outcomes: Reduce incarceration rate by at least 5.2%; increases in job readiness/employment Financing: Senior (Goldman); subordinate PRI (Kresge/Living Cities), grants (various foundations) New York State Goal: Reduce recidivism; increase employment; transitional jobs Required outcomes: Reduce incarceration rate by at least 8%; increases in employment/transitional jobs Financing: Senior (BAML clients), partial loan guarantee (Rockefeller) September 18, 2018

State and Local Jurisdiction Activity Projects under Pilot/Consideration California First demonstration project to improve health outcomes for asthmatic children in Fresno Outcomes: Document cost savings due to program participants’ reduced need for emergency care Colorado, Connecticut, Illinois, Michigan, New York, Ohio, South Carolina Harvard SIB Lab engaged Connecticut, Colorado, Maryland, New Jersey, Pennsylvania, South Carolina, Utah, Washington Legislation introduced/passed September 18, 2018

Early Childhood PFS Projects Under Construction California Nonprofit Finance Fund cosponsoring initiative in Bay Area and Orange County to scale Nurse Family Partnership Project will include return on investment analysis and convening of potential partners Connecticut CT Center for Social Innovation exploring viability of home visitation, community-based health and EC programs Established Office of early childhood September 18, 2018

Early Childhood PFS Projects Under Construction Ohio Governor’s office working with BRT Completed feasibility study with help of Harvard SIB Lab Considering RFP to expand Pre-K to 3 and 4 year olds for 2 years; 400 children/year Considering home visiting as distant choice Oregon Work being done under Prevention & Wellness Health Demonstration project Analyzed client-level data for young children to identify outcomes to link to PFS Proof of concept model planned for 3-years; child welfare system September 18, 2018

Early Childhood PFS Projects Under Construction South Carolina Project underway to expand home visiting services using Nurse Family Partnership model for Medicaid population Feasibility study completed September 2013 Partnering with SC Department of Health and Human Services (SCDHHS) SCDHHS pursuing final approvals to contract with NFP Virginia Medicaid home visiting project being explored with managed care organizations (Sentara and Nova Health) Talked with John Tambornino (HHS) about data procurement Financial model shows considerable savings, with substantial conservatism September 18, 2018

Early Childhood PFS Projects Under Construction Washington DC District engaging in project to reduce teen pregnancies and enhance related educational outcomes Goal is for improved mother/infant health; reduced school dropout rate Request for Proposal has been released for qualified interventions and service providers September 18, 2018

Early Childhood PFS Conference Takeaways Prevention vs. remediation Any success is a success Partnership among uncommon parties with different perspectives to collaboratively achieve improved social results Data, rigor and feasibility studies are critical to deals Focus on outcomes by service providers – opportunity to learn, but reputational and sustainability risks Perfection is the enemy of good – flexibility and big toolkit are important Value of desired social change is what really makes the deal work Gov’t participation is good, but not absolutely required for deal success – as long as the gov’t enters arena at some point Moral hazard and reputational risk issues make this difficult September 18, 2018

Technical Assistance Funded by Pritzker Children’s Initiative/Pritzker Family Foundation Nexus of working documents, sample contracts, leaders, legislation, at www.ReadyNation.org/PFS First national conference of Early Childhood Social Impact Performance Advisors, March 2014 Technical papers on developing PFS arrangements Individual technical assistance to state and local teams Regular webinars on technical subjects on state and federal legislation (next webinar: June 20) Educating key policymakers, investors and EC groups September 18, 2018