Urban Wire The state of pay for success in 2015
Arden Kreeger, Ben Holston, Justin Milner, John Roman
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As the fifth year of pay for success (PFS) in the United States comes to a close, it’s a good time to take a look at the state of the field.

This year’s legislation

At the federal level, 2015 saw the passage of major legislation with PFS language, the introduction of PFS-focused bills, and continued appropriation for programs funding PFS.

The most significant federal legislation on PFS was the Every Student Succeeds Act (ESSA), which replaced No Child Left Behind (NCLB). ESSA made significant funding available for PFS projects supporting programs for disadvantaged youth and student health.

Passed on December 18, the FY16 Omnibus Appropriations Act funded existing federal PFS programs and awards, including the Social Innovation Fund (SIF), Workforce Innovation and Opportunity Act, and Performance Partnership Pilots.

Though it has yet to be voted on in committee, the Social Impact Partnership Act (SIPA) received bipartisan support in both the House and Senate. SIPA would make $300 million available to state and local governments for PFS projects.

State-level legislation focused on creating a more welcoming environment for PFS projects. Colorado and Texas passed legislation authorizing the states to enter into PFS contracts. Pennsylvania, New Hampshire, and Idaho all introduced PFS bills as well.

This year’s projects in development

A number of PFS projects are under development through either SIF or state and local government exploration.

  • SIF: While SIF grantees were originally announced in 2014, several of those organizations announced additional subgrants in the past year to both service providers and local governments interested in building PFS projects. In total, more than 40 projects are in development due to SIF grants. Earlier this month, SIF announced an additional $10.6 million in funding for a second round of PFS grants.
  • State and local development: Several state and local governments conducted feasibility studies and issued requests for proposals for PFS projects. These governments were interested in a broad set of issue areas including health, recidivism, employment, and child development.

This year’s new project

One PFS project launched in 2015 in the United States. In August, Santa Clara County initiated Project Welcome Home to address chronic homelessness. The project will provide assertive community treatment and a Housing First approach to help 150 to 200 chronically homeless individuals. Funders are providing an upfront $6.9 million for the project, and the county will pay up to $8 million over five years depending on the results of a rigorous evaluation.

This year’s outcomes

The first PFS project in the United States ended in July, when the investment in a program to serve young men at the Rikers Island jail in New York failed to show a sufficiently positive effect to warrant continuing the intervention. While the program did not achieve the desired outcomes for participants, the fact that the city ended funding for an intervention that was not working represented an important validation of the PFS model and a first step toward effective innovation in government.

This past fall, the first set of outcomes in the Utah High Quality Preschool Program in Salt Lake County, Utah was announced. Launched in 2013, the project provides high-quality preschool to low-income three- and four-year-olds. In October, only one of the 110 students targeted by the project identified as “at risk” for needing special education ended up using special education services in kindergarten, triggering outcome payments to funders. Some critics have questioned the metrics used to measure the outcome payments, while others focused on lessons learned and the benefits of expanding preschool no matter what the outcomes.  

Across the pond, social impact bonds in the United Kingdom showed promising outcomes that are driving future investments. Three projects, focused on youth employment, health, and education, delivered better outcomes than anticipated, triggering early success payments to investors. Full results of the projects will be published next year, and the UK Department of Work and Pensions re-commissioned all three interventions for additional support.

Looking forward to 2016

While only one new PFS project launched in the United States in 2015, there has still been significant movement in the field. As more than 50 PFS projects under development in the United States move closer to launch, we hope to see a shift toward evidence-based policymaking at all levels of government in 2016. PFS projects are one way to get there.


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