AFSCME, Progressive Groups Criticize Pay for Success (Social Innovation Research Center)

By Patrick Lester

One of the nation’s largest public sector unions, the American Federation of State, County and Municipal Employees (AFSCME), released a report on December 9 criticizing pay-for-success and social impact bonds. The report also listed a number of smaller progressive organizations as co-authors.

According to the report, its aim is “to help advocates identify the critical issues surrounding PFS contracts.”  It cites complexity, high cost, performance measurement difficulties, minimal innovation, and minimized investor risk as potential shortcomings.

The report’s release follows public sector union opposition to a number of local proposals across the country. A local AFSCME chapter opposed a bill before the Rhode Island state legislature. A project in Chicago was opposed by the Service Employees International Union (SEIU) and Chicago Teachers Union (CTU).

The report has drawn positive attention from the National Council of Nonprofits, which represents state associations of nonprofits. One of its members, the Minnesota Council of Nonprofits, was a co-author of the report and its director haswritten a parallel opinion piece in The Nonprofit Quarterly.

Opposition from progressives could undermine Democratic support for pay-for-success in the House and Senate, where stand-alone legislation has been stalled since it was introduced earlier this year.

However, other pay-for-success provisions have been enacted in other bills, including the recently enactedreplacement for No Child Left Behind, a major transportation authorizing bill, and the Workforce Innovation and Opportunity Act last year. Pay-for-success provisions were also included in a bipartisan draft of welfare legislationreleased over the summer.

The Obama administration also remains strongly supportive of the concept. Last week, the Social Innovation Fundannounced the availability of a second round of pay-for-success intermediary grants. (SIRC released a report on the first round winners last year).