Pay For Success: An Innovative Way to Scale Effective Programs

Pay for Success is an innovative public-private partnership mechanism that funds effective social programs through a performance based contract. PFS contracts an private or philanthropic funder (often times a foundation) to provide upfront capital to scale evidence-based social programs to improve outcomes for vulnerable populations. If the program achieves the agreed upon results, the public entity would agree to pay back the investor and/or agree to fund the intervention in the future. This is an attractive model for governments so as to demand greater accountability for taxpayer dollars.

The first PFS project launched in the United Kingdom in 2010, and the first PFS contract in the United States was launched by New York City in 2012 to reduce juvenile recidivism. Since then, early-stage PFS activity has occurred all over the United States. To date, PFS projects have been designed to address a range of issues, including homelessness, recidivism and early childhood education. PFS is of particular interest within the early childhood space because the earlier the investment, the greater opportunity for financial returns. Pay for Success is currently being used in South Carolina to expand Nurse-Family Partnership services to more families with the goal of improving health outcomes for mothers and children living in poverty.

PFS aims to measurably improve the lives of people most in need by driving resources towards better, more effective programs. PFS is of particular interest within the early childhood space because we know that by investing earlier in a child’s life, the greater the financial return will be.
Thanks to generous funding from the Colorado Health Foundation, IIK was able to conduct a feasibility study to determine the use of PFS for expanding The Incredible Years (IY) in Colorado. The results were promising with a model showing returns in the form of cost avoidance and increased student outcomes. Gary Community Investments and the Zoma Foundation have agreed to fund a PFS pilot project with two new community partners, Aurora Public Schools (APS) and Sheridan School District (SSD). This is a tremendously exciting opportunity to initiate partnerships with two districts that Invest in Kids has wanted to work with for a long time. It represents an opportunity to scale and sustain IY in these districts, but will also be studied to determine if we can create a model for expanding IY with districts throughout the state using a PFS contract.