Social Impact Bond Bill Relies On P3 Funding

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DALLAS -- Social impact bond legislation introduced last week in Congress authorizes the creation of public-private partnerships that would be rewarded if they achieve socially desirable outcomes.

The proposal calls for the creation of public-private partnerships that would attempt to solve social challenges by scaling up scientifically proven social and public health programs. The revitalized programs would be funded with philanthropic and other private sector investments.

If the programs achieve social goals set by the federal government, a P3 would have its investments reimbursed and receive a small return from the realized government savings.

The social impact bond proposal, HR 4885, was introduced by Rep. John Delaney, D-Md., and Rep. Todd Young, R-Ind. The measure has been referred to the House Ways and Means Committee and Finance Committee, but no text is yet available of the legislation.

The federal government would identify the desired outcomes that if achieved would improve lives and cut the cost of governmental social programs, Young and Delaney said. States and local governments would submit proposals to work toward the goals, with the private sector funding the social programs.

The goals could include outcomes such as increasing the adoption rate of teenagers in foster care or improving the health and mortality rates of infants in low-income homes, they said.

The social impact bond program would focus on how well social programs perform rather than how much they cost, Young said.

"In other words, instead of arguing about how much or how little we are spending, policymakers should reward what works based on actual evidence," Young said. "Whether you think government ought to do more to help our fellow Americans in need, or you think government needs to save money wherever possible, social impact bonds provide a solution on both counts."

Delaney said the bill is the first detailed proposal to adapt the social impact bond model for broad use at the federal level, and the first proposal to incentivize the realization of savings for the federal as well as state and local governments.

"It moves our government to be more evidence-focused, so we can pay for achieving desired outcomes rather than paying for services regardless of the outcome," Delaney said.

The pay-for-success concept is widely used in the United Kingdom, Delany said, but only on a limited scale in the United States.

"Social impact bonds already being implemented in the states prove it can be done, and if we want federal savings, we need to get the federal government involved," he said.

Jeffrey Liebman, the Malcolm Wiener professor of public policy at Harvard University and director of the Harvard Kennedy School Social Impact Bond Technical Assistance Lab, said Delaney and Young's proposal is an innovative way to tackle hard-to-solve social issues. He said it could be useful by funding projects in policy areas such as early childhood education, diabetes prevention, and workforce development.

The Kennedy School lab has assisted Colorado, Connecticut, Illinois, Massachusetts, Michigan, New York, Ohio, and South Carolina, as well as Chicago and Denver in developing pay-for-success programs, he said.

"Social impact bonds are being used by innovative governors and mayors to tackle some of our nation's most intractable social policy challenges," Liebman said. "For the model to reach its full potential, the federal government needs to be a partner in state and local projects that generate federal savings."

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