There’s a wild and crazy idea in funding social programs, writes AEI’s Katharine B. Stevens: Pay for what works — and stop paying for ideas that don’t work.
New York’s Rikers Island Jail tried a program to reduce youth recidivism that worked elsewhere, but failed at Rikers. Thanks to Pay for Success, also known as social-impact- bonds, it was evaluated rigorously and lost funding when it proved ineffective. Other ways of keeping juveniles out of jail will be explored.
“Less than 1 percent of billions of public dollars spent annually on social services goes to programs that have evidence of actually accomplishing their goals,” writes Stevens. What’s unusual is that an idea was tried — and abandoned — without any cost to taxpayers.
1. The government and investors work together to find a social service provider with a rigorously-documented track record of success that proves their program is worth investing in.
2. Investors pay that service provider to run a scale-up of the program, aiming to improve specific, agreed-on outcomes for a defined group of at-risk individuals.
3. After the program is implemented for several years, the results are evaluated to see if the program achieved its goals.
4. If, and only if, the program is proven successful, the government pays investors back their original investment plus “success payments” out of the taxpayer dollars saved by preventing expensive problems that would have occurred without the program.
5. If the program isn’t successful, like Rikers Island, the government pays nothing and the program is closed.
Two private investors, Goldman Sachs and J.B. Pritzker, have put $6.8 million into the Utah High Quality Preschool Initiative. If Utah saves money on special education for preschool graduates, the state will use the savings to repay the investors.
Six Pay For Success projects have been approved so far and more are in the pipeline, writes Stevens. All are focused on preventing problems.