Flashpoint: Could Indiana use social impact bonds to fight heroin, expand pre-K? (Tribune Star)

By Brent Kent

Indianapolis

Earlier this week the Department of Child Services made a desperate plea for new foster parents. 2,500 more foster families are needed today than the same time last year to house children who have been removed from the homes of drug-addicted parents. In August it was announced that the DCS caseload was up 26 percent over last year due to heroin addiction, which required the state to hire an additional 113 caseworkers. One Marion County Juvenile Court Judge remarked that our children are “drowning in a sea of heroin.”

Perhaps not surprisingly, there are over 7,000 taxpayer-funded beds for drug offenders in Indiana prisons, but only a handful across the entire state for drug treatment. Drug users seeking residential substance abuse care currently face an 8-10 week backlog. Meanwhile Hoosiers are witnessing a heroin epidemic that has resulted in a 500 percent increase in overdose deaths in just two decades and an HIV outbreak that is an official “public health disaster.”

The state’s strategy to focus on drug enforcement at the expense of treatment has proven disastrous, and despite $30 million from the legislature and a newly minted task force to combat the catastrophe, critics say the state’s response has been languid. Since it doesn’t appear we are anywhere closer to a resolution than we were at last sine day, maybe in the 2016 legislative session the state should consider the use of social impact bonds (SIBs) to rapidly scale a statewide response.

SIBs, or “results-based financing” contracts, are already being employed around the country to address homelessness, recidivism, and prepare low-income children for school. SIBs are public-private contracts that allow investors, instead of taxpayers, to fund programs or services for pre-defined social outcomes. Investors are repaid a portion of the cost-savings realized by the public, and only if the program is successful. For example, Goldman Sachs committed $4.6 million to finance the expansion of an early education program administered by the United Way of Salt Lake City. If the program successfully prepares students for kindergarten, the state will repay investors using the $2,600 per-student Utah spends annually on remedial education.

SIBs could allow Indiana to quickly increase its capacity for drug treatment and prevention, without new spending or government expansion. A 2010 study by IUPUI’s Center for Health Policy estimated the economic impact of drug abuse in Indiana to be $7.3 billion annually. That is $7 billion state and municipalities could employ through SIBs to pilot novel approaches or expand proven methods, while shifting the upfront costs and financial risk from taxpayers to the private sector.

This type of detailed accounting of social cost and strict performance metrics encourages a new type of governance that is transparent, accountable, and by its nature small. In contrast to the near-immortal government commission or agency, if this new contract fails to serve its purpose and deliver a social service it terminates at no cost to the public.

Hoosier families and communities need immediate solutions to this epidemic, and SIBs offer one that is economical and outcome-driven. Such an initiative could be replicated to expand access to quality pre-k, which has been proven to save money in the long run, or address any number of social issues at the state and city levels whose economic impacts can be measured. Ahead of the 2016 legislative session, the Governor and legislative leaders should explore what language is needed to permit or establish state and city social impact bond agreements in Indiana.

Brent Kent was a consultant for the former Indiana State Director of StudentsFirst and is now an independent government affairs consultant in Indianapolis.