Pay for Success (PFS) describes a type of social impact contractual arrangement that enables local, state and federal governments to scale up an early childhood program that has a proven record for improving desired outcomes and reducing government costs. Governments pay for a program expansion only if the program actually results in cost-avoidance savings and, governments pay using only a portion of the savings that actually occur.
The money to initially pay for program expansion comes from private and philanthropic investors who believe, based on research-based feasibility studies, that the program will have expected cost-avoidance effects. If it does not, they may lose all or a portion of the money they invested. In this way, governments take on little or no financial risk if cost-avoidance savings are not realized. PFS social impact financing can be an excellent way for business and philanthropic leaders to increase funding and demonstrate the economic power of quality early childhood investments.
New Pay for Success Updates
- ReadyNation, ICS and The Sorenson Impact Center will host the Third Annual Conference of Early Childhood Social Impact Performance Advisors, June 22-24 in Denver, Colorado at the Hyatt Regency at the Colorado Convention Center.
- ReadyNation has developed two fact sheets on the Social Impact Partnership Act. View the fact sheets on the House bill and the Senate bill.
- We have released a paper, “Early Health ‘Pay for Success’ Social Impact Finance: Scaling Up Prenatal Health Care in Virginia” which shows how infant health can be financed using Medicaid cost avoidance savings in a PFS framework. Click here for the financial model used in Early Health ‘Pay for Success’ Social Impact Finance.
ReadyNation specializes in applying PFS finance to scaling up early childhood programs. It is leading an active effort to develop the research, operational and legal frameworks needed to set up successful early childhood PFS arrangements. We also provide technical assistance and make presentations to organizations on early childhood PFS. For more information and assistance in this regard, please contact Phil Peterson on our staff. For sponsoring ReadyNation’s work in this area, we greatly appreciate the generous support of the Pritzker Children’s Initiative, a national project of the J.B. and M.K. Pritzker Family Foundation.
ReadyNation’s 2012 and 2013 papers on paying for pre-k using special education cost savings led the way to development of the Salt Lake City Utah pre-k PFS project and examination by many other local governments and school districts of the feasibility of PFS to improve school readiness and increase k-12 education productivity. To see our 2012 paper on pre-k PFS finance click here. To see the 2013 paper click here.
ReadyNation’s 2014 paper on paying for prenatal counseling is showing state governments across the country how infant health can be financed using Medicaid cost avoidance savings in a PFS framework. Click here to see ReadyNation’s work on prenatal counseling PFS finance.
Though there are more than 50 PFS projects in development in the U.S.; only nine projects have been implemented so far. Of the nine, four are early childhood PFS projects – the Utah High Quality Pre-School Initiative, the Chicago Child-Parent Center Pre-School Initiative, and South Carolina Nurse-Family Partnership Project, and the Connecticut Family Stability Project. ReadyNation partners with the Institute for Child Success (ICS) to disseminate new information and updates on PFS initiatives. To facilitate understanding of some of these projects, the Institute for Child Success (ICS) prepared a brief showing project participants, financing, evaluation, timeframe and expected impact. Click here to see the ICS presentation.
Read more about early childhood PFS in the following papers:
“Early Health ‘Pay for Success’ Social Impact Finance: Scaling Up Prenatal Care in Virginia.” Janis A. Dubno, Robert H. Dugger, Debra L. Gordon, David Levin, and Philip A. Peterson. ReadyNation Working Paper, November 2014.
• Click here for the financial model used in Early Health ‘Pay for Success’ Social Impact Finance
“Financing Human Capital Development for Economically Disadvantaged Children: Applying Pay for Success Social Impact Finance to Early Child Development.” Janis A Dubno, Robert H Dugger, and Michele R Smith. ReadyNation Working Paper, June 2013.
“Early Childhood ‘Pay-For-Success’ Social Impact Finance: A PKSE Bond Example to Increase School Readiness and Reduce Special Education Costs.” Robert H. Dugger and Robert E. Litan. Report of the Kauffman Foundation/ReadyNation Working Group. April 2012.
December 11, 2014-Early Health ‘Pay for Success’ Social Impact Finance: Scaling Up Prenatal Care
June 20, 2014—Webinar: State and Federal Pay for Success Legislation
March 27-28, 2014—Conference of the Early Childhood Social Impact Performance Advisors
March 11, 2014, conference call – The South Carolina Home Visiting PFS Project: ReadyNation – Human Capital & Economic Opportunity Working Group conference call.
December 5, 2013 conference call – PFS Success Social Impact Finance: Salt Lake City Pre-K Project
- Applying “Pay for Success” Social Impact Finance to Early Childhood Education in Salt Lake City (PPT)
- Searching for a business case for quality in Medicaid managed care. Green et. al. 2008. Health Care Management REVIEW.
- Investing in Care of Pregnant Women Yields Healthier Babies and Reduces Costs. CHIP of Virginia. 2007.
October 7, 2013 conference call — Pay for Success Social Impact Finance: Theory and Practice
- “Financing Human Capital Development for Economically Disadvantaged Children: Applying Pay for Success Social Impact Finance to Early Child Development.” Janis A. Dubno, Robert H. Dugger, and Michelle R. Smith. ReadyNation Working Paper. June 10, 2013
October 25–26, 2012 – Kauffman–PAES Conference on Financing Early Childhold Development, Care, and Education
April 26, 2012 conference call — Early Childhood “Pay for Success” Social Impact Finance
April 3, 2012 – Webinar: Social Impact “Pay for Success” Finance: A PSKE Bond Example
January 5, 2012 conference, Human Capital & Economic Opportunity Working Group, University of Chicago, Chicago Illinois – Financing Human Capital Investment
October 25, 2011 – Invest in Kids Working Group 2011 Meetings, Webinar: The Sustainable Financing Model–Evidence from the Granite School District
July 20–21, 2011 – Kauffman–PAES Early Childhood Finance Innovation Conference Call
As Congress debates legislation to provide resources for the development of pay for success social impact finance projects (HR 4885: The Social Impact Bond Act), both ReadyNation and the Institute for Child Success provided statements.
Statement of ReadyNation on HR 4885: The Social Impact Bond Act to the Human Resources Subcommittee, Ways and Means Committee, US. House of Representatives. Robert H. Dugger, Ph.D., Philip A. Peterson, FSA, and Sara Watson, Ph.D.
Comments for the Record of the Hearing on Social Impact Bonds: Can They Help Government Achieve Better Results for Families in Need. In the Subcommittee on Human Resources of the Committee on Ways and Means. Bryan Boroughs, J.D., M.P.P., and Megan Golden, J.D.
- “Early Childhood ‘Pay-For-Success’ Social Impact Finance: A PKSE Bond Example to Increase School Readiness and Reduce Special Education Costs.” Report of the Kauffman Foundation/ReadyNation Working Group. April 2012.
- ReadyNation letter on Washington House Bill 1501 in support of Pay for Success financing, along with comments on how PFS should not supplant or replace existing funding, but rather should be used to scale up proven programs.
- ReadyNation response to a Request for Information of the Department of the Treasury on development of pay-for-success financing, and how to use the resources of a proposed $300M Incentive Fund.
- Department of the Treasury request for information on how to utilize a $300 million Incentive Fund.
- ReadyNation contributed to a response to a request for information issued by Michigan Governor Snyder on pay for success opportunities.
PFS Contracts Working Group Materials
- “Early Childhood Pay for Success Social Impact Finance: Organizational Steps, Memorandum of Understanding and Contract Outlines.” Report of the ReadyNation Working Group on Contracts in Early Childhood Social Impact Finance. ReadyNation Working Paper. June 10, 2013
- ReadyNation SIB Contract Working Group Agreements List and Governance Comments
- ReadyNation SIB contract Working Group Basic Model
- “Pay for Success in the U.S. – Summaries of Financed Projects.” Megan Golden, Brian Nagendra, and Kevin Seok-Hyun Mun. Institute for Child Success. February 2015.
- “Climbing the Pay for Success Learning Curve: How a working group helped South Carolina understand and prepare for PFS financing.” Megan Golden. The Institute for Child Success. March 2014.
- “Pay for Success Financing for Early Childhood Programs: A Path Forward.” Megan Golden and Joe Waters. The Institute for Child Success. January 2014.
- “Using Pay for Success Financing to Improve Outcomes for South Carolina’s Children: Results of a Feasibility Study.” Megan Golden, Joe Waters, Kevin Seok-Hyun Mun. Institute for Child Success. September 2013.
- “Financing Human Capital Development for Economically Disadvantaged Children: Applying Pay for Success Social Impact Finance to Early Child Development.” Janis A. Dubno, Robert H. Dugger, and Michelle R. Smith. ReadyNation Working Paper. June 10, 2013.
- “Early Childhood Pay for Success Social Impact Finance: Organizational Steps, Memorandum of Understanding and Contract Outlines.” Report of the ReadyNation Working Group on Contracts in Early Childhood Social Impact Finance. ReadyNation Working Paper. June 10, 2013.
- “Early Childhood ‘Pay-For-Success’ Social Impact Finance: A PKSE Bond Example to Increase School Readiness and Reduce Special Education Costs.” Report of the Kauffman Foundation-ReadyNation Working Group. April 2012.
- Click here to access the Kauffman-ReadyNation PKSE Spreadsheet
- PowerPoint Presentation on the 2012 Kauffman Foundation-ReadyNation Working Group Report
- View the full bibliography from the Kauffman Foundation-ReadyNation report
- “Foundations for Social Impact Bonds: How and Why Philanthropy Is Catalyzing the Development of a New Market.” Jane Hughes and Jill Scherer. Social Finance. February 2014.
- “Developing Social Impact Bonds: Where Next?” Zia Khan. Rockefeller Foundation. July 16, 2013.
- “Social Impact Bonds: A Guide for State and Local Governments.” Social Impact Bond Technical Assistance Lab (SIB Lab), Harvard Kennedy School. June 2013.
- “Pay for Success Financing.” David Erickson, ed. Community Development Investment Review 9 (1). Federal Reserve Bank of San Francisco. April 2013.
- “Success Begins with a Feasibility Study.” Robert Dugger. Community Development Investment Review 9 (1) 80-84. Federal Reserve Bank of San Francisco. April 2013.
- “Case Study: Preparing for a Pay for Success Opportunity.” Third Sector Capital Partners. April 2013.
- “Developing a Social Impact Bond: Lessons from a Provider.” Megan Golden. The Children’s Aid Society. January 2013.
- “Building a Healthy & Sustainable Social Impact Bond Market: The Investor Landscape.” Steve Godeke and Lyel Resner. Rockefeller Foundation. December 2012.
- “From Potential to Action: Bringing Social Impact Bonds to the U.S.” Laura Callanan, Jonathan Law, and Lenny Mendonca. McKinsey & Company. May 2012.
- “What Is Pay for Success?” Third Sector Capital Partners. October 2012.
- “A New Tool for Scaling Impact: How Social Impact Bonds Can Mobilize Private Capital to Advance Social Good.” Social Finance. October 2012.
- “Bringing Social Impact Bonds to New York City.” Michael Bloomberg. City of New York. August 2012.
- “As city budgets decline, an innovative effort suggests a new way to leverage private capital.” Goldman Sachs. 2012.