Posted by Jonathan Martin
The notion of inviting venture capitalists into the state human services system sounds, I’ll admit, a bit creepy. When I heard that notion was floating around the 2014 Legislature, my thoughts went to the private prison industry and its dismal race-to-the-bottom practices.
Pay For Success project (Source: Commonwealth of Massachusetts)
But as Tuesday’s Seattle Times editorial suggests, the notion, in HB 2337, deserves a second look. So-called “social impact bonds” are racing around public-policy circles, embraced by the left (the write-up) and from the libertarian right (Reason Foundation’s write up).
Massachusetts late last month closed one of these deals, taking funding from Goldman Sachs and others to reduce prison recidivism for men ages 17 to 23 on probation or coming out of juvenile facilities, according to the Boston Globe. AnFAQ distributed by the nonprofit Living Cities, which helped put together the deal, has good details including the potential profit for investors. The chart in this post shows the complicated deal.
When I asked Eileen Neely of Living Cities about the “creepy” response, she seemed frustrated. The state of Washington would pay a contractor to build a bridge, right? “Why is okay for contractor to profit from transportation project and not in human capital?” she said. “On the flip side, we don’t balk when private companies make a lot of money selling tobacco to low-income people. Why shouldn’t we incentivize private capital to benefit low-income people?”
It took 18 months to put together the deal. Neely said it took time to find a program with clear metrics showing cost savings for the state. That’s one reason why the U.S. social impact bond deals target prison recidivism: “That lends itself because it’s a very definitive thing: Either someone is in prison or not,” she said.
When I asked her what advice she’d pass to Washington, should it pass HB 2337, she paused. A deal needs a strong champion in state government; a great nonprofit to deliver the service; and a pool of philanthropic-minded investors.
Washington certainly has the latter two. It currently lacks the first. Although the bill has strong bipartisan support, it appears to be bottled up in the House Appropriations committee, chaired by the powerful Rep. Ross Hunter, D-Medina. It also doesn’t have a Senate champion; no bill was introduced there.
This should be very appealing here, especially if its used to reduce recidivism. King County Prosecutor Dan Satterberg and Department of Corrections secretary Bernie Warner co-wrote a Seattle Times op-ed last year advocating for sharper focus on the revolving door of recidivism, but there hasn’t been a full-force push at the state level. The state has tried myriad cost-saving prison reforms – from drug courts to reducing low-level drug sentences – as Washington dropped its incarceration rate to one of the lowest in the nation. The next cost-saving reform should be a focus on prison recidivism. Passing HB 2337 would be a good start.