Originating in the U.K., social-impact bonds encourage private investors and philanthropic foundations to fund privately managed social programs in areas such as health care and prisoner recidivism. If the programs succeed in reaching previously set targets—and social outcomes improve—investors receive so-called success payments from the government. If the programs don't work, the government pays nothing. In these scenarios, investors take on all the risk and the government pays only for programs that work.
Chart from UK's Social Finance
"An ounce of prevention is worth a pound of cure" -Ben Franklin
OMB factsheet on "Paying for Success" and POTUS FY 2012 proposal's $100 million for pilot
CAP report "Social Impact Bonds: A promising new financing model to accelerate social innovation and improve government performance"
One Service, UK's first social impact bond in action
Social Finance's report "Bringing Social Impact Bonds to Massachusetts"
What SIBs could benefit in the US:
- National Guard Youth Challenge (through DOD, applies military discipline to provide skills training to at-risk youth)
- Permanent housing for chronically homeless individuals
- Home and community based aging programs for elderly
- Community-based alternatives to juvenile and adult offenders
- Increase kindergarten readiness among low-income children
- Increase college completion rates
- Raise the future earnings of laid-off workers
- Reduce hospital readmissions among patients with chronic illness
- Transition services for youth with disabilities (decreasing future need for Supplemental Security Income assistance)
- Job-training programs (increase participant earnings, so government gets additional tax revenue and spends less on welfare)
- Financial aid for students at for-profit colleges
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