The goal of Pay for Success programs is to help people in need by supporting innovative service providers who are working to address some of the biggest social issues of the day.
The Pay for Success model is a partnership between government, service providers, investors, foundations, and independent evaluators. These diverse entities are brought together by independent project managers that help expand flexible and reliable funding for service providers and track the effectiveness of programs over time ensure government funding is directed toward programs that succeed in measurably improving the lives of people most in need.
Government works with nonprofit project managers to solve a social problem by identifying high-performing providers, such as nonprofits and charities, and determining targets for measurably improving outcomes through a Pay for Success contract.
If the program is successful in delivering services that improve the lives of the people it is meant to serve, then government repays those who made the original investment. If, and only if, the program exceeds the pre-determined outcomes, the government pays a small return on the investment.
If the program does not achieve its target results, government does not repay those who made the original investment. This model ensures that taxpayer dollars are being spent only on programs that actually work.
When Pay for Success works, the government wins, the service provider wins, and hopefully funders recoup their investment.
The reality today is that high-impact service providers do not have access to the funding they need. This is primarily due to the fact that government support for social programs is not always tied to results. But it is also because governments tend not to fund the entire cost of a program upfront, leaving service providers with an uncertain and inadequate funding stream.
Pay for Success solves these problems by tapping private funders to provide the full upfront costs of the program and by establishing performance goals that allow government, funders, and project partners to measure outcomes and track success over time. The goals are set collaboratively with service providers to ensure they are ambitious, yet realistic performance measures that strengthen the program and the services it delivers.
Because Pay for Success typically focuses on funding preventative services, their success saves governments money by reducing their need to spend down the road on more costly programs. Because returns are paid only at the highest levels of success, the longer-term savings more than offset the slightly higher costs of designing and implementing a PFS contract.
Americans broadly support government spending on social programs to help people most in need in their communities. However, governments need better information about the effectiveness of social programs so they can make informed funding decisions and use taxpayer dollars most effectively. Pay for Success helps drive resources toward programs that actually work, delivering better outcomes for people in need and improved accountability for government spending.
By embracing Pay for Success, governments can deliver larger scale and better services to people in need and drive funding toward programs that work best in their communities, without further straining their budgets or putting taxpayer money at risk.
Today, many programs are helping people across the country—but too often the most effective programs lack adequate funding because governments don’t always have the ability to effectively track results. Pay for Success expands funding for high-quality programs that actually deliver results, which means more lives improved in communities nationwide.
The model gives highly effective service providers, including nonprofits and charities, access to flexible, reliable, and upfront resources to tackle critical social problems by tapping private funding to cover the up-front costs of the programs.
Independent project managers support the collaboration between service providers, government, and funders. By rigorously measuring the effectiveness of these programs over time, Pay for Success ensures increased accountability for government spending and taxpayer dollars are being spent on programs that are actually succeeding in improving people’s lives.
Through bringing significant new capital to traditionally under-resourced issues, Pay for Success gives service providers an opportunity to scale resources for high-quality programs in a way that they never could before and track their results over time.
In the four years since Pay for Success has been introduced to the U.S., the model has captured the interest of national policymakers and grown exponentially, with all levels of government recognizing its value in helping reach more people in need and in achieving more impactful outcomes. Elected officials across party lines have championed the Pay for Success model.
Currently, there are PFS programs at the state, city, and county level in diverse areas of the country, ranging from the Commonwealth of Massachusetts, to New York City and Salt Lake City, and Cuyahoga County in Ohio. There are currently at least two-dozen projects in development, with continued growth of the model projected over the next several years.
The federal government has also recognized the potential of PFS in helping to bring new and diverse players to traditionally under-funded and often neglected issues. To support the organic and local growth of PFS projects around the country, the federal Social Innovation Fund has allocated funding to expand pilot projects that will allow more states, cities, and counties to utilize this model.
Pay for Success programs are tackling some of the biggest issues of the day by identifying and scaling highly effective and integrated interventions that have been proven to improve outcomes in communities. While government faces competing priorities, Pay for Success is driving funding toward traditional under-resourced and underserved issues.
Some social problems that are benefiting from the Pay for Success model today include: reducing the number of individuals who return to prison; improving pre-K education for children in poverty; improving outcomes for families involved in the child welfare system; lowering teen pregnancy rates in a community; providing in-home care for low-income elderly; and other similar efforts.