The voices of Urban Institute's researchers and staff
October 16, 2015

How Pay for Success can make evidence-based governing contagious

The first U.S. Pay for Success (PFS) pilot projects have generated both useful data and critical questions that investors, governments, and service providers will need to consider as the social impact bond program expands, panelists said Wednesday at Urban in a discussion of Pay for Success.

PFS is an innovative financing mechanism that shifts risk away from government and toward new investors who provide up-front funding for evidence-based social programs. On Wednesday, guests including Urban president Sarah Rosen Wartell and White House Office of Management and Budget Director Shaun Donovan examined the lessons learned from the first set of PFS projects, which launched five years ago, in the context of a broader push across federal, state, and local governments for evidence-based policymaking.

Following Director Donovan’s remarks, a panel of PFS leaders—Nonprofit Finance Fund CEO Antony Bugg-Levine, Georgetown University’s Beeck Center Director Sonal Shah, Salt Lake County Mayor Ben McAdams, and Baltimore’s Promise Founder Tomi Hiers—discussed the practical challenges and opportunities facing communities considering PFS as a way to solve difficult social problems. These challenges include limited government capacity to use data effectively and the need in many state and local governments for continued support to figure out the complexities of public-private partnerships, program evaluations, and new funding models like PFS.

Panelists also discussed some early PFS success. Perhaps the most important role that PFS has played is what Mayor McAdams described as the “contagion” effect: because of its roots in evidence, PFS has helped generate a culture of outcomes orientation even if no PFS deal comes to fruition. As PFS grows, it has the power to reframe how leaders at all levels of government think about delivering and evaluating social services.

Both Urban and OMB announced programs Wednesday that are meant to help PFS grow further and faster, to capitalize on that contagion effect. Urban has released an application for training and technical assistance to help guide, design, and assess potential and existing PFS projects. State, county, and city governments and intermediaries at all phases of developing, designing, and implementing PFS projects are invited to apply for free consultation and on-site training services from Urban experts. Given the many questions unearthed by the first PFS transactions, this support will be a crucial safety net to communities taking the next step in their exploration of PFS.

Beyond offering important assistance, this program will facilitate knowledge-sharing among stakeholders who are exploring PFS, those who have already been a part of transactions, and Urban experts. Director Donovan noted Wednesday that knowledge sharing among Pay for Success stakeholders is also critical at the federal level and he announced the creation of an information-sharing mechanism to enable agencies to learn from each other.

There is a lot of buzz around PFS and it is time to start putting theory into action. As the first PFS deals begin to yield results, Urban’s PFS Initiative is excited to provide knowledge, support, and assistance to expand the field, apply valuable lessons learned, and commit to the principles of evidence-based policy to achieve better outcomes for underserved populations.

Panelists discuss the future of Pay for Success at an event held at the Urban Institute on Oct. 14, 2015. Photo by Lydia Thompson/Urban Institute.

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