From Incarceration to Incorporation: D.C.’S Bold Plan for Improved Economic Mobility (emPower)

By Etienne C. Toussaint

Stand up. Fight back. Black lives matter.

As recently as December 2015, these words rang out loud and clear down the streets of downtown Washington, D.C. as local protestors marched in unison, calling attention to the growing number of police misconduct cases that have taken American cities by storm.

On January 28, 2016, the D.C. Council responded in a meaningful way by hearing public testimony on the District of Columbia Incarceration to Incorporation Entrepreneurship Program Act of 2015, an innovative bill that seeks to empower the District’s most vulnerable citizens. Through the creation of a business development program targeting formerly incarcerated individuals, this legislation promises to help “educate, train, and assist returning citizens, in becoming self-sufficient entrepreneurs and civically engaged residents.”

During a time of increasing distrust between communities of color across the country and a seemingly partial criminal justice system, this legislation presents an opportunity for Washington, D.C. to boldly and proudly declare that the lives of incarcerated men and women of color matter. An opportunity to breathe hope onto the flames of frustrationthat swept through places like Gallery Place-Chinatown and U Street, N.W. as local protesters rallied and chanted, “Stand up, Fight Back.” An opportunity to begin dressing the wounds ofour country’s rancid history of mass incarceration, a history that has left far too many hopeful men and women scarred with an oozing keloid brand called “ex-convict”.

The numbers speak for themselves. In Washington, D.C., an estimated 60,000 people have a criminal record and more than 8,000 return to the city each year from prisons across the country. These citizens – predominantly young African American men between the ages of 21 and 30 – face tremendous challenges as they strive to reintegrate into their old neighborhoods. In an October 2014 report by the District of Columbia Department of Corrections (“DOC”), 37% of these young men self-reported as having no education. Moreover, the Council for Court Excellence found that 77% of D.C. offenders who return from prison received no employment assistance while incarcerated, and only one-third of those surveyed stated that assistance was available to them post release. To be fair, the recently formed D.C. Office on Returning Citizen Affairs – an innovation in its own right – can only do so much with approximately 0.2% of the DOC’s $140M budget.

Still, with limited access to gainful employment and supportive social structures, is it any surprise that more than half of our returning citizens are arrested for a new crime within three years of release? The aftershock of incarceration ripples much further than the walls of D.C. and federal prisons. It is felt in the homes of spouses and trusted relatives left behind, who often must fill the gaps left by diminishing budgets for reentry services. It is felt in the bedrooms of children who suffer lifelong health impacts from damaged familial relationships. And it is felt in the tattered pockets of returning citizens, men and women who often face limited employment opportunities, a critical trigger of recidivism.

The Incarceration to Incorporation Entrepreneurship Program Act offers a unique platform for Washington, D.C. to not only invest in the lives of ambitious citizens struggling to find employment, but also empower communities seething with the “righteous indignation” of a frustrated generation. Understandably, there is a divide between providing beneficial social services and minimizing taxes that may impede economic growth. Funding this initiative requires both a multi-stakeholder effort and an innovative solution. Recent efforts by foundations, corporations and governments across the globe demonstrate that pay-for-success contracts and social impact bonds, or SIBs, can serve as a potential pathway to help D.C. bridge that gap.

Social impact bonds work by creating partnerships between government, private foundations, nonprofits and private investors to inject private-sector capital into traditionally public-sector activities. Service providers are funded through privately invested funds, and private investors are repaid with government cost savings after evidence-based metrics have been achieved. If performance targets are not met, the government does not pay for the services delivered. This model is a powerful tool for state and local governments to reduce costs while quantifying the outcomes of their programs, as well as an opportunity for philanthropies and private investors to help tackle recidivism and unemployment.

The first social impact bond in the United States was launched by New York City in 2012 to help reduce juvenile recidivism at the Rikers Island Correctional Facility. In 2013, New York also created a pay-for-success contract aimed at reducing adult recidivism by providing job training for recently incarcerated adults. An increasing number of other jurisdictions across America have also begun exploring social impact bonds as vehicles for change. For example, in 2014, the state of Massachusetts contracted with nonprofit service provider Roca and announced a $21.3M, seven-year social impact bond aimed at reducing the recidivism rate within the state by 40%.

To be clear, SIBs are a new innovation. Metrics need further clarification and the best service providers need to be identified. As a result, not every implementation will reap rewards for private investors. The New York program at Rikers Island was recently terminated in July 2015 after failing to meet its recidivism goals, resulting in a $1.2 million loss in outcome payments for Goldman Sachs. Perhaps the lesson to be learned from the Rikers Island program is that incarcerated men and women need less Moral Reconation Therapy and more opportunities for economic mobility. Perhaps the true driver of recidivism is not poor decision-making, but limited choices in poor neighborhoods.

Nevertheless, these initiatives have proven immensely valuable, not only providing the government with important lessons on how to vet service providers and effectively measure success, but also illuminating key insights on identifying the best structures for public-private partnerships. Moreover, investment banks like Goldman Sachs have not stopped supporting SIBSs. In fact, Goldman recently became the first successful social impact investor in the United Statesby financing a SIB to help pay preschool costs for Utah special needs students. After a year in preschool, the one hundred students participating in the program did not require additional help, and the State of Utah repaid Goldman Sachs with state educational cost savings.

D.C.’s proposed legislation can utilize the pay-for-success and social impact bond model, alongside other funding streams, to help finance the Incarceration to Incorporation Fund, which will administer the business development program for returning citizens. Recidivism is a social problem that can be objectively measured and will result in identifiable cost savings to the government, factors that have proven to be critical to the success of social impact bonds. Moreover, in a world of limited employment prospects for returning citizens, entrepreneurship can be a pathway to the middle class. And with programs like the Small Business & Community Economic Development Clinic at the George Washington Law School, led by Professor and Director Susan R. Jones and Visiting Associate Professor Etienne Toussaint, returning citizens do not have to do it alone.

For too many Americans, a prison record feels like banishment to another country. But in the words of President Barack Obama, “In America, we believe in redemption . . . We believe that when people make mistakes, they deserve the opportunity to remake their lives.” This legislation is not simply about individuals who once made a mistake. This is not simply about mothers, and fathers, and sisters and brothers who need our help. This is about residents of Washington D.C., and citizens of these United States. This is about lives that matter. It’s about time D.C. stood up, fought back, and did something to welcome them on their return home.

Etienne Toussaint is a Visiting Associate Professor of Clinical Law and Friedman Fellow with The George Washington University Law School’s Small Business and Community Economic Development Clinic. Prior to teaching law, he spent several years in Washington D.C. working in private practice as a project finance attorney, and subsequently in the public interest as a civil rights advocate, focused on federal housing policy and social justice issues.