1 Social Innovation Financing Ryan Gillette Massachusetts Executive Office for Administration and Finance National Association for State Community Service Programs Annual Conference September 12, 2012

Motivation 2 We are not making rapid enough progress in solving social problems 75% of males aging out of DYS are convicted of another crime Thousands of chronically homeless individuals lack access to stable housing and preventative healthcare These are not only negative social outcomes, but also costly to the state

Timeline for Massachusetts Initiative 3 Research and analysis RFI issuedRFR issued Legislation filed Contract negotiation May 2011January June 2012 On-going Put out Request for Information in May 2011 Asked for ideas about areas for interventions, ideas for structuring the contracts, key considerations for providers and intermediaries, etc. Received over three dozen responses from a wide variety of organizations Request for Responses issued in January 2012 For each project, issued two RFRs: one for intermediaries, one for providers Numerous responses for intermediaries and providers received on both projects; final selection and negotiations are on- going Request for Responses issued in January 2012 For each project, issued two RFRs: one for intermediaries, one for providers Numerous responses for intermediaries and providers received on both projects; final selection and negotiations are on- going “Full faith and credit” of the Commonwealth pledged Passed House and Senate in June 2012

Massachusetts Initiative Youth Aging Out of the Juvenile Justice System Working with Roca, YOU, and Third Sector Capital Partners Target highest risk youth by focusing on behavioral changes and job training Aim to serve 300 youth per year for three years Expect budget savings of at least $30,000 for each youth who is redirected to a better path, primarily from reduced incarceration costs Chronically Homeless Individuals Working with the Massachusetts Housing and Shelter Alliance Target chronically homeless individuals with high healthcare expenses Aim to house 400 chronically homeless individuals over a three year period Expect annual budget savings of $20,000 per housed individual, primarily from reduced Medicaid spending. 4

Massachusetts Model Service Provider Intermediary Investors Government The commonwealth plans to have direct relationships with the service providers, largely to protect vulnerable service populations

Challenges Creating an evaluation plan Randomization is best, but not always possible Getting the necessary data Linking data systems that have never been combined Operational challenges Managing referrals, smoothing out caseloads, etc. Budget challenges Monetizing agency level savings Convincing investors that future administrations will honor commitments

Pay for Success Budgeting Governor Patrick signed legislation in July that would allow the Secretary of Administration and Finance to enter into Pay for Success Contracts, for total multi- year commitments of up to $50 million, to be supported by the Commonwealth’s “full faith and credit” (i.e. our unbreakable commitment) This structure will provide outside parties with comfort that they will get paid in three to five years if and when they demonstrate success. The legislation also included a “sinking fund” provision that would require the Secretary to seek appropriations for a pro-rated portion of the contract during each year of the program. This appropriation of budgeted funds is expected to be done outside of existing agency budgets and measured against savings across impacted government Areas. 7

Next Steps 8 Finalize the contracts Secure investors Implement the programs Scale Repeat!