Details
Referenced by jeff shumway Philadelphia City Council Hearing On Social Impact Bonds 2016
Referenced by jeff shumway Center For Employment Opportunities Inc
Start Date 2016-03-02
Notes And if you want to state your 18 name. You can decide who is going first. 19 State your name for the record and begin 20 your testimony. 21 MR. SHUMWAY: Jeff Shumway, 22 Social Finance. 23 COUNCILWOMAN BASS: Bring the 24 mic a little bit closer. 25 MR. SHUMWAY: Jeff Shumway, Page 43  STREHLOW & ASSOCIATES, INC. (215) 504-4622 Committee on Public Health and Human Services March 2, 2016 1 3/2/16 - PUBLIC HEALTH - BILL 160018, etc. 2 Social Finance. 3 So thank you all for the 4 opportunity to be here. My role here 5 today is to explain the concept of Pay 6 for Success, and I'd like to do that by 7 calling your attention to the one-page 8 handout with four slides you should have 9 in your packet. 10 Before I begin speaking to 11 that, I'd like to give a high-level 12 overview of what Pay for Success is and 13 is not. 14 At its core, Pay for Success is 15 about measurably improving the lives of 16 those most in need by driving more 17 government resources to the most 18 effective programs, full stop. We will 19 talk about many other things. We will 20 talk about investors and funding and 21 outcomes and evaluation, but at its core, 22 I want to make sure that we convey this 23 message clearly, that this is about 24 helping those most in need. 25 Social Finance where I work is Page 44 STREHLOW & ASSOCIATES, INC. (215) 504-4622 Committee on Public Health and Human Services March 2, 2016 1 3/2/16 - PUBLIC HEALTH - BILL 160018, etc. 2 a registered 501(c)(3) non-profit, and 3 our mission is to mobilize capital to 4 drive social progress. We do that mainly 5 through Pay for Success projects. 6 So if I can call your attention 7 to the second slide, which has a triangle 8 with three entities. Pay for Success is 9 a public-private partnership between 10 these three entities. So you'll see at 11 the top of this triangle there's a 12 high-quality non-profit. At the bottom 13 right, there's a payor, typically 14 government, and at the bottom left, 15 you'll see is their impact investors. 16 And I will define "impact investors" as 17 those who would like to invest money for 18 social good, but they need that money 19 returned to them so they can do more 20 social good. They recycle their money 21 into new social programs. 22 What's new about this 23 partnership is the way in which the 24 funding flows and the accountability for 25 outcomes flows. So in this case, Page 45 STREHLOW & ASSOCIATES, INC. (215) 504-4622 Committee on Public Health and Human Services March 2, 2016 1 3/2/16 - PUBLIC HEALTH - BILL 160018, etc. 2 government begins the project by stating 3 the outcomes it desires to achieve and by 4 contracting with someone like Social 5 Finance to put together the project. 6 From there, money from the impact 7 investors is used to expand the services 8 of the non-profit. The non-profit, by 9 virtue of its positive track record and 10 often outside impact evaluations, is 11 confident that it can achieve certain 12 social outcomes, typically just two or 13 three that we build the project around. 14 Those outcomes are pre-agreed in a 15 contract with government. Not only which 16 outcomes but also how they will be 17 measured and how they will be valued by 18 government. Then when an outside 19 evaluator finds that those outcomes have 20 been met after a measurement period, 21 government then repays the impact 22 investors per the agreed-upon pricing for 23 those outcomes. 24 So two things to note here. 25 First, as you all know, under a typical Page 46 STREHLOW & ASSOCIATES, INC. (215) 504-4622 Committee on Public Health and Human Services March 2, 2016 1 3/2/16 - PUBLIC HEALTH - BILL 160018, etc. 2 services contract, a non-profit service 3 provider is paid regardless of the 4 outcomes. A non-profit service provider 5 can provide great outcomes and they get 6 paid. They can provide awful services 7 and provide no outcomes or even harm the 8 people that are participating in their 9 programs and get paid. 10 Under Pay for Success, 11 non-profits are paid by the impact 12 investors, but then the government only 13 pays if there are positive outcomes. 14 The second point to note here 15 is that the non-profits are protected and 16 they are paid either way. It's the 17 impact investors that are taking the risk 18 of the outcomes being achieved or not. 19 So with that in mind, I'd like 20 to walk you through a real live example 21 that is currently providing services in 22 New York state. So, again, as a 23 reminder, I'm going to walk through the 24 way in which the funding flows, not the 25 order in which the project is developed. Page 47 STREHLOW & ASSOCIATES, INC. (215) 504-4622 Committee on Public Health and Human Services March 2, 2016 1 3/2/16 - PUBLIC HEALTH - BILL 160018, etc. 2 These projects are built in a customized 3 way per the needs of government. 4 So the funding begins with in 5 this case high net worth individuals from 6 whom we raised $13.5 million. We 7 accessed those individuals through Bank 8 of America. So while Bank of America did 9 not invest in this project, they were our 10 access point to speak with these 11 investors. 12 That money then flows into a 13 limited liability corporation, which is 14 controlled by Social Finance, my group. 15 And then the money flows to our service 16 provider. We selected the Center for 17 Employment Opportunities, which is a 18 wonderful service provider from New York 19 with a long history and track record and 20 evidence based and strong evidence that 21 they could achieve certain outcomes for 22 reducing recidivism through transitional 23 work programs. 24 By virtue of the evidence that 25 they have, the Center for Employment Page 48 STREHLOW & ASSOCIATES, INC. (215) 504-4622 Committee on Public Health and Human Services March 2, 2016 1 3/2/16 - PUBLIC HEALTH - BILL 160018, etc. 2 Opportunities, or CEO, knows that they 3 have a better effect on the highest risk 4 guys coming out of state prison and a 5 better effect on those that are recently 6 released. So we built a project 7 specifically around that targeted 8 population. 9 So the money allows them to 10 serve 2,000 additional high-risk guys 11 coming out of prison. We then track 12 those guys on three outcomes. One, did 13 they participate in a transitional job 14 provided by CEO. Two, were they employed 15 in the fourth quarter post release from 16 prison. And, number three, how many days 17 did they spend in prison. Each of those 18 has an outcome price attached to it that 19 we pre-agreed. As those outcomes are 20 achieved and validated by an evaluator, 21 repayment is triggered from the State of 22 New York back into the LLC and then back 23 to the investors. 24 So one last point here. As you 25 see on Slide 4, this has been done Page 49 STREHLOW & ASSOCIATES, INC. (215) 504-4622 Committee on Public Health and Human Services March 2, 2016 1 3/2/16 - PUBLIC HEALTH - BILL 160018, etc. 2 exactly 11 times as of a couple weeks ago 3 in the United States. This began in 4 criminal justice as a way to try to 5 prevent mass incarceration and to help 6 reentry for those in prison. It's also 7 been used in early childhood education, 8 specifically to try to reduce the amount 9 of special education needed for kids who 10 would otherwise require it. It's also 11 been used quite a bit in homelessness and 12 family stability, as you'll see in the 13 third column. And then, lastly, we just 14 launched a project around maternal and 15 child health to ensure healthy outcomes 16 for moms who are at greater risk. 17 With that, I will simply end by 18 saying these projects are difficult, they 19 are complex, but I also believe that they 20 bring added focus on positive outcomes 21 for those participating and make better 22 use of government resources by virtue of 23 the fact that government's resources are 24 only used when positive outcomes are 25 achieved, and to me that represents the Page 50 STREHLOW & ASSOCIATES, INC. (215) 504-4622 Committee on Public Health and Human Services March 2, 2016 1 3/2/16 - PUBLIC HEALTH - BILL 160018, etc. 2 shift that we would all like to see in 3 our society.