Pay for Success (PFS) crossed a major threshold in the US last week with New York City and the State of Massachusetts announcing the launch of pilot projects.
New York City announced it will launch a PFS pilot to reduce youth recidivism for over 3,400 adolescent men coming out of incarceration from Rikers Island. Preventative education and counseling services financed by the pilot will be overseen by a program intermediary, MDRC, and will be delivered by two nonprofit organizations, Osborne Association and Friends of Island Academy. Goldman Sachs will be investing in the pilot through a $9.6 million loan, which will be backed by a $7.2 million partial guarantee from Bloomberg Philanthropies. NYC Press Release
Also, Massachusetts announced they have selected the organizations that will participate in the launch of two PFS projects addressing youth recidivism and homelessness. The Corporation for Supportive Housing and Massachusetts Housing and Shelter Alliance were selected as program intermediaries for the delivery of preventative services designed to address chronic homelessness in one of the pilots.In the second pilot, Roca Inc. will provide job training and counseling services to address recidivism for youth leaving juvenile detention. Third Sector Capital Partners was selected as the financial intermediary overseeing both of these projects. Massachusetts Press Release
Both the Massachusetts and NYC pilots illustrate how US state and local governments are adapting PFS transactions to meet their specific needs. For example, Massachusetts will use both a financial intermediary and a program intermediary in its pilots, and NYC will use solely a program intermediary. Also, NYC will structure its pilot with a partial private guarantee to support the transaction. To learn more about the range of structural approaches to PFS that might be used by US state and local governments, please see the PFS structure and risk continuum presented earlier this year by NFF.