Social Innovation Financing
Ryan Gillette
Massachusetts Executive Office for Administration and Finance
National Association for State Community Service Programs Annual Conference
September 12, 2012
1
Motivation
• We are not making rapid enough progress in solving
social problems
• 75% of males aging out of DYS are convicted of
another crime
• Thousands of chronically homeless individuals
lack access to stable housing and preventative
healthcare
• These are not only negative social outcomes, but also
costly to the state
2
Timeline for Massachusetts Initiative
Research
and analysis
2010-2011
RFI issued
May 2011
RFR issued
January 2012
Legislation
filed
June 2012
Put out Request for
Information in May
2011
Request for
Responses issued in
January 2012
Asked for ideas
about areas for
interventions, ideas
for structuring the
contracts, key
considerations for
providers and
intermediaries, etc.
For each project,
issued two RFRs: one
for intermediaries,
one for providers
“Full faithfor
Request
and credit”
Responses
of
the
issued in
January 2012
Commonwealth
pledged
For each project,
issued two
Passed
House
RFRs:
andone
for intermediaries,
Senate
in June 2012
one for providers
Numerous responses
for intermediaries and
providers received on
both projects; final
selection and
negotiations are ongoing
Numerous responses
for intermediaries and
providers received on
both projects; final
selection and
negotiations are ongoing
Received over three
dozen responses
from a wide variety
of organizations
Contract
negotiation
On-going
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Massachusetts Initiative
Youth Aging Out of the Juvenile Justice System
• Working with Roca, YOU, and Third Sector Capital Partners
• Target highest risk youth by focusing on behavioral changes and job training
• Aim to serve 300 youth per year for three years
• Expect budget savings of at least $30,000 for each youth who is redirected to a
better path, primarily from reduced incarceration costs
Chronically Homeless Individuals
• Working with the Massachusetts Housing and Shelter Alliance
• Target chronically homeless individuals with high healthcare expenses
• Aim to house 400 chronically homeless individuals over a three year period
• Expect annual budget savings of $20,000 per housed individual, primarily from
reduced Medicaid spending.
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Massachusetts Model
Government
Investors
Intermediary
Service
Provider
Service
Provider
The commonwealth plans to have direct relationships with the service
providers, largely to protect vulnerable service populations
Challenges
• Creating an evaluation plan
• Randomization is best, but not always possible
• Getting the necessary data
• Linking data systems that have never been combined
• Operational challenges
• Managing referrals, smoothing out caseloads, etc.
• Budget challenges
• Monetizing agency level savings
• Convincing investors that future administrations will
honor commitments
Pay for Success Budgeting
Governor Patrick signed legislation in July that would allow the Secretary of
Administration and Finance to enter into Pay for Success Contracts, for total multiyear commitments of up to $50 million, to be supported by the
Commonwealth’s “full faith and credit” (i.e. our unbreakable commitment)
This structure will provide outside parties with comfort that they will get paid
in three to five years if and when they demonstrate success.
The legislation also included a “sinking fund” provision that would require the
Secretary to seek appropriations for a pro-rated portion of the contract during each
year of the program.
This appropriation of budgeted funds is expected to be done outside of existing
agency budgets and measured against savings across impacted government
Areas.
7
Next Steps
• Finalize the contracts
• Secure investors
• Implement the programs
• Scale
• Repeat!
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