Patrick adminstration seeks to employ profit motive to finance, improve social services
The Patrick administration is taking the first steps towards a new way to finance social services by offering investors the chance to earn profits on programs they establish.
The state’s Executive Office of Administration and Finance today called on social entrepreneurs to submit formal proposals for performance-based programs to stem chronic homelessness, and to support youth aging out of the juvenile corrections and probation systems in Massachusetts.
The approach, known as “pay for success” or “social impact bonds,” is based on the idea that if investors fund social programs that succeed in addressing an issue and generating savings for the state, then the government would use some portion of that money to pay investors back.
“We’re only going to pay if they work,” said state Administration and Finance secretary Jay Gonzalez. His office also hopes to tap some of the $100 million that President Obama has proposed spending on such initiatives.
Gonzalez said the state’s interest in pay for success programs and social impact bonds stems from the “new fiscal reality” and Patrick administration’s resulting interest in finding ways to offer social services while working to save taxpayers money. Likely investors include philanthropists and foundations.
If the first round of programs are a success, the state said it would consider expanding its efforts to address other social ills.
Erin Ailworth can be reached at eailworth@globe.com. Follow her on Twitter @ailworth.
