CLEVELAND (AP) — Ohio is joining other states in encouraging private groups to fund and run innovative social experiments to address vexing social problems like opioid addiction, infant mortality and environmental pollution without putting tax dollars at risk upfront.
Republican Treasurer Robert Sprague is championing the statewide effort, called ResultsOHIO, which is included in the next two-year budget and would provide paybacks with interest to investors when projects achieve or exceed targeted goals. Ten other states have enacted legislation for similar “pay-for-success” programs, which are also known as social impact bonds.
Sprague said he was spurred to explore such a program when, as a House member from northern Ohio, he heard from a constituent about how her adult children had cycled in and out of rehab for opioid addiction.
“We’ve tried hard and invested a lot of money in the treatment system in Ohio,” Sprague said in an interview. “But our recovery rates are stubbornly at 10 to 15%. So how do you have innovation occur in the system to increase those recovery rates?”
The basic pay-for-success model typically looks like this: A government agency, a nonprofit service provider and a third-party organizer decide a societal problem needs to be addressed and agree on how to conduct a pilot program. The organizer helps secure funding from philanthropic groups or for-profit entities that are willing to risk their money with the promise they’ll get a return on their investment plus interest if an independent evaluation concludes a project has succeeded.
The government agency, which could be the state or a local government, then repays investors if the project works.
Sprague hopes pay-for-success experiments will create models that public agencies can replicate to deliver services more efficiently.
“This creates the best of both worlds, where we leverage the private sector’s ability to innovate and the public sector’s ability to fund and operate programs and scale them statewide,” Sprague said.
About two dozen pay-for-success programs are underway across the U.S. None has reached a point yet where evaluators have concluded whether or not investors should be paid back all or part of their investment.
In New York City, a nearly $10 million project was launched in 2012 to keep youthful offenders from returning to the city’s Rikers Island jail. The program ended in 2015, a year before its scheduled completion date, when it became apparent it could not achieve its stated goal of reducing recidivism by 10%.
Other pay-for-success programs include an effort in Washington, D.C., to reduce pollution flowing into the Chesapeake Bay, and one in South Carolina to address maternal and child health for first-time mothers.
The first county-sponsored pay-for-success program is in Cuyahoga County, which includes Cleveland. The program in 2015 began providing intensive intervention to 135 families whose children were forced into foster care because of homelessness and neglect with the goal of reuniting those children with their mothers.
The $4 million program was organized and is being overseen by a Boston-based nonprofit called Third Sector Capital Partners. Frontline Service, a group focused on homelessness, is responsible for the delivery of services with support from various groups. The Philadelphia-based Reinvestment Fund, George Gund Foundation and Cleveland Foundation provided the bulk of the financing. A team from Case Western Reserve University is the project’s evaluator.
David Abbott, executive director of the Gund Foundation, said that based on preliminary results, it doesn’t appear his organization will be paid back its $1 million.
While the program has reunited some families, the cost of the interventions has exceeded targeted goals, he said. Abbott said the results are disappointing, but added they should still inform Cuyahoga County on how to improve the delivery of services to homeless and separated families.
“I’m confident that, at the end of the day, we will feel good about this whole experiment,” Abbott said. “We’ll see if it leads to other pay-for-success approaches on certain issues. I hope it does, but that requires agreement by a lot of parties.”
Pay-for-success shouldn’t be viewed as a way to fund social services with private money, but to help communities focus on necessary goals and how to achieve them, said Brian Beachkofski, managing director of Third Sector.
“What will change the world is having governments be more responsive and accountable to the community,” Beachkofski said. “That’s what makes me hopeful.”