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16 Jun 2017
Service

Pay for Success/Social Impact Bonds

The Pay for Success (PFS) model, also known as the Social Impact Bonds model, is a relatively new way to finance improvements in persistent social problems. PFS brings together investors with local, state, and federal government agencies to fund and improve education, health, and social services. AIR is implementing this approach in many communities around the country.

For example, a local company or community investor might fund programs to reduce homelessness or strengthen literacy among young children. Connecting such upfront funding to specific program outcomes requires independent evaluators to determine whether the outcomes have been met. If these services deliver their intended results (e.g., reduced homelessness, improved student literacy), the government then reimburses investors for the cost of the service, along with a modest return on their investment (typically 1 to 2 percent of the overall investment). In this design, the investors bear the initial cost of services and take the risk of not being reimbursed should the service not produce the intended outcomes as measured by the evaluators.

Typically, an intermediary organization may provide technical assistance to public agencies and service providers, strengthening their capacity to deliver evidence-based programs and strategies to achieve outcomes. Why would investors take that risk? Because improving these near-term outcomes (for example, greater literacy in pre-kindergarten through third grade) may have important effects on the broader social and public sectors (e.g., increased earnings, greater consumer buying power, and decreased reliance on government safety nets). The PFS model has been used in the United States since 2012, with more than 12 projects underway and about 50 projects under development. The chart below depicts the stakeholders in a typical PFS project.

Stakeholders in Pay for Success

Diagram of pay for success process

PDF icon Pay for Success/Social Impact Bonds (PDF)
PDF icon Social Impact Partnerships to Pay For Results Act (SIPPRA) (PDF)

Pay for Success Projects at AIR

Project

Project (re)LAUNCH: San Diego Veterans Employment Pay for Success Initiative

The transition back to civilian life is difficult for many veterans. Often times, military training does not directly translate to civilian skills and available jobs back home. Addressing these challenges is the central aim of the San Diego Veterans Employment Pay for Success Initiative, Project (re)LAUNCH, a partnership of the San Diego Workforce Partnership; Third Sector Capital Partners, Inc.; 2-1-1 San Diego; and AIR.
Project

Readiness and Capacity-Building Toolkit for Pay for Success Investments

A major challenge in the growth of the Pay for Success model, which brings together investors with government agencies to fund and improve services in the community, is effective assessment of provider capacity. AIR is creating an organizational readiness toolkit, which is informed by a synthesis of the current literature on PFS and implementation science, as well as interviews with leading intermediary organizations and their community partners.
Project

National Capital Region Pay for Success Demonstration Project for Permanent Supportive Housing

Pay for Success models bring together investors with local, state, and federal government agencies to fund and improve education, health, and social services. For the U.S. Department of Housing and Urban Development and the U.S. Department of Justice, AIR is testing a PFS model in Maryland to support people experiencing chronic homelessness in Montgomery and Prince George’s Counties.
Project

English Language Acquisition Feasibility Study

English language learners often need additional support to read at grade level by the third grade—a milestone predictive of future educational and occupational success. Yet schools and communities often do not have the resources to provide those supports. AIR is conducting the feasibility phase of a Pay for Success project for the U.S. Department of Education to improve English language acquisition for Spanish-speaking children in pre-K through third grade.
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Contact

Barbara Broman

Barbara Broman

Managing Director

Topic

Education
Early Childhood and Child Development
English Learners
Reading and Literacy
Health
Housing and Homelessness

Related Presentations

Provider Constellations and Its Implications for Readiness Assessment in Pay for Success

Emerging Trends and Issues in Incorporating Pay for Success/Social Impact Bonds to Increase Collective Impact of Prevention Programming

RESEARCH. EVALUATION. APPLICATION. IMPACT.

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