A day of debating stances…
The Controversy Behind ESSA’s Pay For Success Initiative
Erin McIntyre – Education Dive
With the newly-signed Every Student Succeeds Act (ESSA) becoming the K-12 law of the land, some critics are decrying one particular clause: the “Pay for Success” initiative. It’s a program that allows for private investors to profit from returns on the upfront financing of educational programs, for example, with social impact bonds.
In layman’s terms, Pay for Success means that private firms can step up to pay for public services. They’re then repaid with interest, subsequently turning a profit, if the services funded result in cost savings for the state.
Paying For Success With Social Impact Bonds
Katie Braggins – The Social Enterprise Review
In the current political climate, many complain that the government is wasting precious taxpayer dollars while others advocate that the government should be doing more. Social Impact Bonds (SIBs) provide a flexible financial framework that can be used to target contemporary issues without the risk of wasteful government spending. SIBs are not like the traditional municipal bond with a fixed rate and term, and are (unlike a traditional socially-motivated grant) contracts between government agencies, private investors, intermediary organizations, and service providers. This works when public-sector agencies determine a measurable goal impacting a target population to occur within a set period of time. The agency then pledges financial returns to impact investors, recognizing that these returns will only be paid out if the desired outcome is achieved. This is commonly known as a “pay-for-success” contract. Impact investors provide capital to the intermediary organization, which in turn provides service providers with working capital and management. These providers deliver services to the target beneficiaries, and the financial return is determined by an external evaluator, who rigorously evaluates the impact on the target population.