Pennsylvania pursuing 'pay for success' model under Wolf (Central Penn Business Journal)

By John Hilton

Gov. Tom Wolf said today that Pennsylvania seeks feedback in developing its proposal for evidence-based, innovative "pay for success" (PFS) financing model.

PFS performance contracts – also known as "social impact bonds" – are rigorous, binding agreements based on a straightforward proposition: taxpayers will only pay for services that actually get results and save money in the long run.

In the PFS model, governments partner with private sector investors, who provide up-front funding to promising service providers. Investors only receive a repayment from the government if objective benchmarks for savings and other benefits are achieved, the state said in a news release.

Because governments pay only if the programs work, the PFS model has the potential to effectively allocate taxpayer dollars while increasing funding for programs that deliver improved social outcomes. 

These public-private partnerships will be selected on a competitive basis, and payment will only occur after validation by an independent, third-party evaluator, the release said.

Wolf's first budget includes proposed legislation that would enable the state to enter into PFS contracts.The governor's proposal identifies five high-priority areas for possible PFS initiatives:

  • Early childhood care and education, including prekindergarten education and services that address maternal and child outcomes from pregnancy through age 2;
  • Education, workforce preparedness and employment, including school-to-work programs and alternative education services;
  • Public safety, including programs that reduce recidivism;
  • Health and human services, including addiction treatment, chronic homelessness, supportive housing and child welfare; and
  • Long-term living and home and community based services.

Earlier this month, Wolf announced that Pennsylvania was selected as one of five states and localities to receive technical assistance from the Harvard Kennedy School to help develop PFS projects.

The state is seeking input from service providers and other stakeholders in order to make this initiative as successful as possible, the release said. In order to help the state develop the most effective program, respondents are invited to provide information on:

  • What promising policy areas, service providers and interventions could be candidates for PFS contracts in Pennsylvania?
  • What considerations should the state take into account in structuring PFS contracts?
  • What outcomes should the state prioritize in PFS contracts?
  • Are there opportunities for the state to partner with local government entities on PFS contracts that achieve savings and benefits at multiple levels of government?
  • What lessons can the state learn from the experience in other states that have implemented PFS contracts?
  • What other information would be useful to the state in preparing a formal request for proposals for PFS contracts?