Orthodox Easter is over, and Passover has been and gone, and today we lead with a great story by David Hammond & Bill Jaeger about how PFS works, backed up with another highly encouraging comment by Anna Bowden. Enjoy:
Guest Commentary: Pay-For-Success Works
David Hammond & Bill Jaeger – Denver Post
Colorado is stuck in a frustrating cycle. We know that investments in some types of social services can decrease the need for expensive remedial spending later. Yet, we cannot afford to invest in prevention because we are paying so much for remediation. And underfunding preventive measures now means the need for remediation expenditures will continue to increase while our ability to fund prevention will continue to decrease.
Our inability to provide high-quality preschool for all of Colorado’s at-risk children is just one example of how we could benefit families and taxpayers if we could invest more in prevention. A recent study demonstrates that, in North Carolina, participating in high-quality early-learning programs reduces the probability that at-risk children will need special education assistance by up to 40 percent.
Imagine the savings for Colorado local and state school budgets if more children could participate in Colorado’s Preschool Program. With an up-front cost of $3,400 per child, an investment in quality preschool substantially reduces the likelihood that a child will need special education services, which cost on average $9,000 annually on top of standard per pupil costs. We currently cannot provide preschool for nearly two-thirds of our at-risk children.
So, how do we escape the cycle of being unable to pay for services that prevent problems because we must pay for services that deal with problems? State governments from New York to Utah have adopted Pay for Success approaches to address challenges ranging from homelessness to criminal recidivism to early childhood development. Pay For Success allows the business, philanthropic and nonprofit sectors to fund preventive services that could generate savings great enough to pay back upfront costs with potentially a modest return — only if the efforts succeed — and still provide savings for taxpayers.
Innovating With Development Impact Bonds
Anna Bowden – Conscious Company Magazine
In his 2015 State of the Union address, President Obama spoke of the importance of using the lesson of Ebola to “build a more effective global effort to prevent the spread of future pandemics, invest in smart development, and eradicate extreme poverty.” What if this “investment” he mentioned wasn’t just an off-the-cuff message about the need to do more? What if it referred to the hard-core investors we normally associate with Wall Street and expensive suits? What if the large companies where we do our banking, save for our retirement, and manage our investments could help fund this global effort – say through vaccinations for millions of people in developing nations – while also generating a profit?
The concept isn’t as radical as you might think, and in fact, pilots like these are cropping up throughout the world. The model is the Development Impact Bond (DIB). In the simplest terms, DIBs are a partnership between private sector investors, donor and host governments, and a local service provider (often a non-governmental organization, or NGO) to implement an economic development program. For example, let’s say the partnership is around improving girls’ education in a given African nation. The partners will sit down together and assess the available data on girls’ education (such as the proportion of girls educated and how long they stay in school); what the limitations are to their education (e.g., is there a lack of access to schools or teachers, or are there disincentives to go to school such as laboring in a family business?); and finally, what the partners would agree is a good outcome for girls’ education. Let’s say the group agrees that, given available evidence, a 20% improvement in the number of girls completing school sounds ambitious, but achievable.