Building a Smarter, More Efficient Government through “Pay for Success”

In recent weeks, the Administration has taken several steps to advance Pay for Success, an innovative approach for the government to partner with philanthropic and private investors to fund proven and promising practices, significantly enhancing the return on taxpayer investments. Under this model, these organizations provide the up-front capital for social services with a strong evidence base that, when successful, achieve measurable outcomes that improve the lives of families and individuals and reduce their need for future services. Government pays when these measurable results are achieved.

This week, the Department of Housing and Urban Development (HUD) announced  it will provide $5 billion in grant dollars to assist in the rebuilding and strengthening effort following Hurricane Sandy and encouraged the five states impacted by the storm to make use of evidence-based, Pay for Success strategies where appropriate. 

This funding will create new opportunities to rebuild damaged infrastructure, stronger than it was before the storm. Possible projects include management of increased storm water, reducing future flood damage, and protecting water treatment facilities.

This came on the heels of a recent grant announcement by the Department of Labor to provide almost $24 million in grants to pilot Pay for Success initiatives in New York and Massachusetts. These grants are designed to increase employment and reduce recidivism in ex-offender populations.  These projects will feature strong private sector support to amplify the public dollars. They also will use rigorous valuation methods to measure their outcomes, which also will be reviewed by independent validators.

Finally, the Department of the Treasury recently issued a Request for Information (RFI) that will help design a proposed $300 million Incentive Fund to further expand Pay for Success.  The Fund is intended to empower cities, states and nonprofits to test new Pay for Success models. This same Fund was also part of the President’s commitment of nearly $500 million in this year’s Budget to expand Pay for Success strategies.

The RFI is designed to solicit input from nonprofits, state and local leaders, and the public about how to design the fund in order to ensure it can support the most promising programs and drive the best outcomes. If you would like to add your thoughts, check out the RFI here.

These recent announcements are just the latest examples of how this Administration is using Pay for Success as a promising strategy to build a smarter, more innovative government.

For more information on Pay for Success, check out this July 2013 White House blog post on Administration initiatives to advance this strategy.

Jonathan Greenblatt is Special Assistant to the President and Director of the Office of Social Innovation and Civic Participation in the Domestic Policy Council.