Here at Irvine, we’ve been pushing ourselves to be more agile and gutsy. Alongside our three longer-term program strategies, we’ve been looking for opportunities to support experimentation with new solutions that have the potential to dramatically improve opportunity for Californians.
In January, we made a bet that nonprofit and public sector leaders were eager to pilot Pay for Success funding agreements in California. These innovative agreements have the potential to bring new and more reliable capital to evidence-based prevention and intervention programs for people in need. In doing so, they would also save money by preventing the more costly services needed to treat problems after they’ve occurred.
In a Pay for Success funding agreement, private investors pay for preventive or interventional social services up front. If, and only if, those services deliver their intended results, governments then reimburse the investors with a return on their investment, while saving money on what they otherwise would have spent. While Pay for Success experiments are underway in several other states, none have been structured yet in California.
Today, we’re excited that our partners at the Nonprofit Finance Fund, who lead the California Pay for Success Initiative, are announcing the five projects being awarded support to try to craft these innovative agreements in communities across our state. Chosen for their state of readiness and likelihood of closing a Pay for Success agreement in the next two years, they include efforts by leaders in local governments to explore Pay for Success as a new model for procuring services, as well as efforts by leaders of national nonprofits seeking to expand their proven interventions via this innovative funding model. These projects will take place in multiple California cities and will address issues including recidivism, maternal and child health, homelessness, and mental illness, among others.
These five projects were chosen from among 38 applicants, each demonstrating the enterprising leadership and pioneering energy that typifies our state. That number far exceeded our expectations and shows that this innovative idea is on many leaders’ agendas.
We were impressed by the number of local governments taking a thoughtful and strategic approach to exploring this model. We also were impressed by the number of evidence-based national programs that applied. These programs, eager to expand their work in California, have strong data-driven management systems that position them well to be providers in a Pay for Success agreement right now. But we also saw lots of very promising earlier stage, locally based programs that need support from others to build out their evidence base if they are to participate in Pay for Success agreements in the future. We hope what we learn and share will inspire other funders and investors to support other projects as well.
Lastly, I want to note that we are reminded again of the importance of grantee partners such as the Nonprofit Finance Fund with deep expertise and strong capacity to lead initiatives like this. I encourage those of you that wish to learn more about this innovative funding mechanism to read more on NFF’s Pay for Success website.
We’re privileged to be able to accelerate the momentum to test Pay for Success in California. We will continue to share what we learn and, as always, we welcome your feedback.
Donald J. Howard
Interim President and CEO