Will private investors help pay for social services? Oregon projects seek to find out (The Oregonian)

By Amy Wang

Oregon Health & Science University, two counties and a Portland-based nonprofit will join a national initiative looking into whether it's feasible to tap private investors to fund some social services.
The Oregon project, Pay for Prevention, will focus on preventing children and youth from entering the state's child welfare and foster care systems.
Third Sector Capital Partners, a nonprofit advisory firm, chose OHSU's Center for Evidence-Based Policy, Multnomah and Marion counties and Friends of the Children to receive training and assistance funded by a three-year, $1.9 million federal grant from the Social Innovation Fund. The Social Innovation Fund, created in 2009, is run by theCorporation for National & Community Service, best known for its AmeriCorps program.
Third Sector also selected public agencies in Texas, California, Virginia and Nevada.
Pam Curtis, director of the Center for Evidence-Based Policy, said Wednesday that it has been working on developing Oregon's version of the social innovation financing project known as Pay for Success for the past five years. Under Pay for Success, private investors are asked to foot the upfront cost of a social-service program. If the program meets its contracted goals, the investor is reimbursed and receives a premium. If not, the investor eats the financing with no risk to the taxpayer.
The OHSU project, which is also seeking a legislative appropriation of $5 million, will seek to identify Oregon communities where children have high probabilities of entering the foster care system and then run a pilot test, with a pool of 300 children and families, to determine which preventative services are most effective.
The consulting firm ECONorthwest has been assisting with the project by collecting data on children who have been involved with foster care, such as their parents' marital status, educational attainment and work history; the children's health status at birth; and whether a mother abused alcohol during pregnancy, ECONorthwest president John Tapogna said at a Salem meeting on child welfare in January.
Curtis said Wednesday, "It's an exciting possibility for our state and it provides a way for us to fund preventative services for high-risk kids. It's an opportunity that we haven't had before."
For Multnomah County Commissioner Judy Shiprack, Third Sector's assistance means the county will learn how to place dollar values to the performance of the social service agencies that contract with the county. Officials will also learn how to create multi-year contracts that won't rely on annual renewals approved by the Board of Commissioners, she said Wednesday.
"For the government, you need to look down the road longer than a budget year and determine what success is worth," Shiprack said.
As a test, Multnomah and Marion counties will be working with Youth Villages Oregon, an organization that provides in-home, family services to prevent troubled youth from entering foster care, residential treatment, detention centers and other juvenile facilities, according to a county press release. Exactly how much investment will go to that project is unclear until the county finishes its Third Sector training.
"What we want to achieve at the end of the day is keeping our children out of the juvenile justice system," Shiprack said.

Terri Sorensen, president of Friends of the Children, said its project will be measuring its model of long-term, professional mentorship "and how that can provide government cost savings in the areas of education, juvenile justice prevention and child welfare."

The nonprofit has provided mentors to more than 1,400 children nationwide, including more than 500 in Oregon, since it was founded 22 years ago. It selects children whose family histories suggest they are at risk of not graduating from high school, becoming teen parents or entering the juvenile justice system, Sorensen said.

Among participating children, 83 percent graduate from high school, 98 percent avoid teen parenting and 93 percent stay out of the juvenile justice system. "We're intent on expanding this model, so this is a big win for us," Sorensen said.
The idea of private investment in social issues is not new. Certified B Corporations, or B Corps, which have been around for nearly a decade, work under a "Declaration of Interdependence" that pledges to harness the power of private enterprise to create public benefit.

-- Amy Wang and Tony Hernandez