Social Impact Bonds: The Next Neoliberal Thing Sanford F. Schram Political Science Department Hunter College, CUNY Public Policy Program, Roosevelt House Presentation at Massey University, Auckland, New Zealand, March 26, 2014

Neoliberalism: Social Impact Bonds as One Piece of the New Puzzle Neoliberalism Defined Political Liberalism Economic Liberalism Neoliberalism vs. Neoconservatism Market Fundamentalism as the Return to Laissez Faire Marketization of the State as Plan B Privatization, Contracting, PPPs, Performance Management, Evidence-Based Practice, Managed Care, Social Impact Bonds

Neoliberalism in Social Welfare Provision Marketization of State Operations Public-Private Partnerships Philanthrocapitalism— Buffett Pledge Gates Foundation Education Health Blurring the Boundaries State, Market, Civil Society The Non-non-profit

Social Impact Bonds Defined A Social Impact Bond is an instrument used by a public entity to enlist private investors to loan money to pay for public services with the incentive they will make a profit if the service meets designated targets.

Social Impact Bonds (SIBs): A Fast-Track Global Social Policy First developed as an idea by New Zealand Economist Ronnie Horesh in 1988. First SIB issued in London for Prisoner Reentry Program in 2010. Canada, Australia and the US have followed with SIB programs. 5 states currently have SIBs for prison reentry and child welfare programs. Other areas are being considered. US President Obama has set aside $485 million in FY2014 to fund state pilot programs for Pay for Success Bonds (SIBs by another name).

The Rationale for SIBs Experimental programs go unfunded Governments need new sources of revenue Preventive Programs could produce long-term savings Incentives of Pay for Success produce results

SIB Standard Model

Graphic Version

Outside Evaluation is Key

It’s More Complicated in Practice: The NYC Juvenile Reentry Program

NYC Projections: Success Payment Schedule for the Rikers Island Reentry Social Impact Bond Reduction in Re-Admission Net Savings ($) City Payment to MDCR ≥20.0% $20,500,000 $11,712,000 ≥16.0% $11,700,000 $10,944,000 ≥13.0% $7,200,000 $10,368,000 ≥12.5% $6,400,000 $10,272,000 ≥12.0% $5,600,000 $10,176,000 ≥11.0% $1,700,000 $10,080,000 ≥10.0% (breakeven) $ ≥ 1,000,000 $9,600,000 ≥8.5% $ ≥ 1,000,000 $4,800,000

Selecting Interventions Focus on prevention Multi-year track record (5+ years) Record of rigorous evaluations Statistically significant results Sizable constituent base Replicable and scalable intervention Deliver taxpayer benefits in 5 years

Current Policy Areas Program Area Intervention Chronic Homelessness Permanent Supportive Housing Juvenile Justice Functional Family Therapy Low-Income Seniors Not Specified

Internal Issues • Requires coordination between multiple players and strict adherence to multiple criteria in order to work • Not all social problems will be a good fit due to measurement challenges and the difficulty of defining outcomes • The time horizon for social change is often longer than government funding cycles; appropriations laws would need to be changed • Lack of existing infrastructure, especially intermediary organizations and third-party evaluators • Social services would need to place a greater emphasis on outcome measurement • Could create unintended consequences in cases where social interventions were not effective

External Issues • Crowds out conventional funding • “Teach to the Test” effect • What Works agenda wins over the What’s Right agenda • Economic criteria become the exclusive baseline for social programming • Private Financiers call the shots—only the programs they will invest in get funding

Conclusion Neoliberalism is a Juggernaut The Solutions to the Problems of Neoliberalism seem to be more Neoliberalism The What Works Agenda is winning over the What’s Right Agenda Marketization of the State needs to be Challenged to put people first