Issues

Pay for Success is an innovative contracting model that drives government resources toward social programs that prove effective at measurably improving the lives of those in need. To date, Pay for Success projects have primarily focused on three areas that service providers, governments, and investors have identified as high need and with the potential for significantly improved outcomes: criminal justice, homelessness, and early childhood development. These issues pose persistent societal challenges for which preventative or early interventions can have meaningful impact. Expanding effective solutions to these challenges creates an opportunity for long-term social, economic, and health benefits for the individuals served as well as their communities.

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Criminal Justice

Given persistent high rates of incarceration in the U.S., advocates, service providers, philanthropists, and government leaders have increasingly focused on ways to reduce the number of individuals entering the prison system and providing effective supports for those returning to society. As many as two-thirds of individuals who go to prison are re-arrested within three years often because they are left without a support system to assist in finding housing or employment. The risks presented by a weak support system are heightened in adolescent populations, who may have interacted with the criminal justice system, putting them at higher risk to be incarcerated as adults.

Pay for Success initiatives aim to interrupt the cycle of chronic recidivism by filling a gap in services for high-risk populations—either by preventing future incarceration or providing supports to those exiting the criminal justice system—thus reducing costs down the road. The goals of these programs are to reduce time in jail and raise employment and education attainment among individuals who may have touched or recently exited the criminal justice system. For those preparing to exit the system, programs often provide integrated services—in the form of therapeutic interventions, education, career training, and counseling, or some combination of these services—that previously were not available to individuals returning to their communities.

Pay for Success projects run by high-performing service providers with the support of government and investors provide people a second chance and help create better futures for these individuals, their families and their communities.

Early Childhood

There is growing evidence that a child’s first five years of life has long-term effects on their health, education, and behavior well into the future. Early childhood development programs are about changing the odds for low-income and at-risk children and families, setting them up for success from the start.

However, it is difficult to see the immediate impact of high-quality early childhood programs, with meaningful results often not showing up until later in a child’s life. As such, and compounding the problem, federal and state funding for early childhood programs has been lagging, given competing budgetary priorities and overall economic strain in the public education system. Pay for Success initiatives in early childhood alleviate funding pressures in the short-term by tapping private investment for upfront resources and tracking success over time, providing new and better data on the impacts of the program.

Projects in early childhood development have provided and expanded high-quality preschool programs that improve school readiness and academic performance, and reduced the need for special education services. Other projects have worked to improve infant health by pairing nurses with at-risk mothers and families, decreasing childhood hospitalization and emergency department use due to injury, increasing healthy spacing between births, and increasing the number of low-income, first time moms receiving supportive services in high-poverty zip codes.

Homelessness

Homelessness and housing instability force individuals and families to rely on public safety net and emergency programs to meet their basic needs. In addition, chronically homeless individuals—those who have been homeless for more than a year—often struggle with complex and interrelated behavioral health issues, which can lead to repeated jail time or emergency room visits. At best, emergency services may provide short-term relief and temporarily address acute needs (at a high cost), but they have no impact on the underlying causes of chronic homelessness.

Pay for Success projects aim to increase housing stability and also provide supportive social services that improve health and economic stability to better meet the needs of homeless individuals. More importantly, Pay for Success has allowed for the growth of integrated programs that include access to housing and a range of services such as mental and behavioral health and substance abuse programs, educational and vocational support, health services, and financial counseling.

Pay for Success projects have the potential to generate savings to taxpayers and societal benefits resulting from reduced medical, legal, and other costs.

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