In New York State, 44% of formerly incarcerated people without employment return to prison within two years of their release. New York State launched a Social Impact Bond in 2013 tackling the issue of recidivism for 2,000 formerly incarcerated individuals who were deemed at risk of reoffending. The Center for Employment Opportunities (CEO) is using a program called “Transitional Work,” to provide evidence-based comprehensive employment services, including training, transitional employment, and job placement services to help people find opportunity after prison. In two phases spanning five and a half years, the project aims to increase employment by at least five percent and reduce recidivism by at least eight percent. If successful, the project will improve the future outlook for these individuals and give them the foundation for stable and productive lives.
- Year Launched2013
- Service Delivery Term (Years)4
- Motivation for Project44% of formerly incarcerated individuals who are under community supervision and without employment return to prison within two years.
- Project Objective(s)Support 2,000 high-risk recent offenders in New York State transition back to the community through re-entry transitional employment services aimed at increasing unsubsidized employment and reducing recidivism.
- Individuals Served2000
- GeographyNew York City and Rochester, NY
- Issue AreaRecidivism
- Initial Investment ($ millions) [Note 2]13.5
-  This category captures the initial private investment raised to support the project that has the potential to be repaid if the project achieves its pre-determined outcomes. Many projects, particularly those in the supportive housing and health arenas, leverage existing public resources, such as subsidized housing and health insurance, to achieve program impact; the value of these resources is not included in these dollar values but are discussed in more detail in Sections 7, 8 and 9 of this report.
- Service Provider(s) [Note 1]Center for Employment Opportunities
- Payor(s) [Note 2]New York State Department of Labor; US Department of Labor [Note 9]
- Transaction Coordinator(s) [Note 3]Social Finance US
- Evaluator [Note 4]NYS DOCCS Research; NYS DOL Research
- Validator [Note 5]Mike Puma Associates, LLC (formerly Chesapeake Research Associates)
- Project Manager [Note 6]Social Finance
- External Legal Counsel [Note 7]Jones Day
- Technical Assistance Provider(s) [Note 8]Harvard Kennedy School Government Performance Lab
-  Delivers program interventions to target population over the course of the PFS contract
-  Makes payments when pre-determined outcomes have been met
-  Both New York State and the Commonwealth of Massachusetts were the recipients of grant funds from the United States Department of Labor, awarded through a competitive process through the Workforce Innovation Fund. Grant funds received through this process are being used in whole or part to fund outcome payments, in combination with resources committed by the states themselves. In both cases, the PFS contract is held by the state, so the federal agency is not the payor of record.
- Roles and responsibilities may include: design and structure of PFS project and financing model; capital raise; stakeholder management; on-going performance management
-  Design and implement plan for determining whether outcomes have been met
-  Verify accuracy of data used in evaluation plan, or evaluation plan itself
-  Intermediary during service delivery phase, and/or fiscal sponsor for project funds
-  Provide assistance in drafting, reviewing and negotiating PFS contracts
-  Provide support and expertise to project stakeholders in the project development and/or project implementation phases
Evidence and Program Design
- Service Intervention(s) Model and/or TypeCEO Transitional Work model
- Evidence base for intervention1 RCT; Provider performance data
- Has effectiveness of the intervention for PFS project target population been evaluated?Yes
- Has the service provider provided this intervention previously?Yes
- Is PFS project: Scaling an existing intervention by replicating at a larger scale? Demonstrating the effect of a new program model or combination of services? Transplanting an existing intervention(s) to a new target population and/or service delivery setting?Scaling
- Evaluation Design MethodologyRCT
- Data Source(s) for EvaluationNew York State unemployment insurance database; NYS Department of Corrections and Community Supervision; Service provider data
- Outcomes Tied to Success Payments1) Number of jail/prison bed-days; 2) Engagement in transitional job [Note 1]; 3) Increases in employment
- Outcomes Tracked, Not Tied to Success PaymentsNone
- Length of Evaluation Period5.5 years
-  Transitional, or subsidized, work, is central to the Center for Employment Opportunities’ intervention model as a critical step toward achieving employment and avoiding recidivism.
Service Provider Characteristics and Service Delivery
- Single or multiple service providers?Single
- Service provider type(s) (nonprofit, government, private)Nonprofit
- Service provider OR site selection methodSolicited as partner by successful bidder to state RFP for transaction coordinator
- Service Provider Experience with PFS InterventionPFS intervention is proprietary to service provider
- Referral Method for PFS Target PopulationVoluntary enrollment by participants identified as high-risk by parole bureau given directive to participate in program as special condition of parole
- Did the project have a ramp-up phase? (Y/N; brief description)No
PFS Contracting and Governance
- Operational Oversight Structure [Note 1]Management Committee made up of NY State Depts. of Corrections and Community Supervision and Labor representatives, service provider, project manager and Government Performance Lab
- Frequency of meetings and/or reportsMonthly
- Executive Oversight Structure [Note 2]Executive Steering Committee made up of state officials form executive branch, Depts. of Corrections and Community Supervision and Labor, and project manager; service provider participation as special advisor/observer
- Frequency of meetingsPeriodically, with quarterly updates
- Investor role in project governance?None
- Frequency of reporting to investorsQuarterly
- Non-standard Contract Termination Events [Note 3]1) Termination of project manager by state for non-responsibility , with no replacement of project manager by state
- Appropriations Risk Mitigation Strategy [Note 4]Annual two-year budget appropriations
-  Committee or working group involved in regular and/or day-to-day monitoring of project progress
-  Oversight and decision-making body for PFS project
-  Events that allow stakeholders to exit their contractual obligations, beyond those typically found in loan agreements and contracts
-  Means by which to mitigate risk that funding is not available for investor repayment
- Senior Investor/ Lender and Total Senior Investment ($MM)Bank of America Merrill Lynch ($13.5) [Note 11]
- Subordinate Investor/ Lender and Total Subordinate Investment ($MM)None
- Deferred Fee Source and Total Deferred Fees ($MM)[Note 1]None
- Recoverable Grant Source and Total Recoverable Grants($MM)[Note 2]None
- Non-recoverable Grant Source and Total Non-recoverable Grants ($MM)[Note 3]None
- Guarantor and Guarantee ($MM) [Note 4]Rockefeller Foundation ($1.3)
-  In addition to the $17 million raised from private sources, Medicaid will fund approximately $13 million via a 1915(b) Medicaid Waiver, awarded to the South Carolina Department of Health and Human Services by the federal Centers for Medicare and Medicaid Services.
- Illinois Dually-Involved Youth Project
-  Deferred fees are delayed payments for the services provided by service providers, transaction coordinators and/or project managers. Deferred fees are one way of structuring projects so that more stakeholders have a financial interest in ensuring project success.
- Philanthropies can use either their regular grant making protocols, or protocols for program-related investments (PRIs), to contribute to PFS capital stacks. If a foundation does not use a PRI, their investment may be structured as either a loan or a recoverable grant. The distinction between the two is in the expectation of repayment. A loan, even if from a philanthropic source, is expected to be repaid, and structured accordingly. A recoverable grant does not bear the same expectation of repayment.
-  Non-recoverable grants are traditional grants contributed to capital stacks; if the project is successful and generates full repayment, the non-recoverable grants can remain with the service provider or project manager, or be recycled by the original funder.
Basic Repayment Structure
- Initial Investment ($Millions)13.5
- Maximum Repayment Funds Committed by Payor ($Millions)21.6
- Full service delivery term (years)4
- Full repayment period (years)5.5
- Interim outcomes reported? Tied to payments?No/No
- Sustainability/ Recycling of FundsGovernment Partners hope to continue successful programs
Detailed Repayment Terms
- Trigger for initial repayment of principal [Note 1]1) Employment outcome: 5% increase in 4th quarter employment compared to control group; 2) Recidivism and transitional work outcome: ~37 day decrease in average incarceration days compared to control group
- Threshold for full repayment of principal10% reduction in recidivism
- Threshold for full repayment of principal plus maximum success payments40% reduction in recidivism
- Repayment timingYear 4; Year 5.5
- Return to Investor [Note 2]Expected IRR at base case 6-8%
- Success Payment to Other Stakeholders? [Note 3]Yes: Intermediary
-  Initial repayment does not equate to full principal return. Investors may recover only part of their principal if projects do not meet a certain level of success.
-  There is no standard methodology for calculating investor return. These numbers are what is publically reported, and comparing from one project to another may not be an apples-to-apples comparison for the reason of potentially different calculation methodologies. Calculation methodologies may be provided in investor agreements, which are not available publically and were not available for this report’s analysis.
-  Success payments for other stakeholders such as project managers and service providers create a financial incentive for project success.
- Project Development Costs Not Covered by PFS Capital RaiseGovernment Performance Lab fellow; Legal services; Transaction coordinator fees
- Funding source(s) for project development costs, if anyPro bono legal support, in addition to fee
- Project Implementation Costs not covered by PFS CapitalNew York State project and data management costs for evaluation; Validator; Project Intermediary
- Funding sources for implementation costs not covered by PFS capitalUS Department of Labor; Social Finance (in-kind project management)