Editorial: Getting private help with public problems (Daily Courier)

It's easy to point out all the problems in the world and say they need fixed. It's not so easy to find the money to fund the fixes.

Like Arizona, other states are struggling with similar issues including education funding and combating homelessness. Cities like Prescott have found themselves in debt and with the inability to keep salaries at competitive levels. With those issues hanging over governments, where are the funds going to come from to improve the social problems?

Australian and English officials asked that same question and a New Zealander provided an answer that has spurred a new movement.

Social impact bonds.

Also known as a Pay for Success bond, it involves "a government entity teaming up with a private intermediary that develops the project, identifies effective programs already being used and raises the capital from philanthropic-minded investors. If the initiative produces specific results over multiple years, then the state or local government pays back the investment with a small rate of return. But if the project doesn't meet those results, the taxpayers typically are not on the hook financially," as explained by The Associated Press.

Massachusetts became the first state in the U.S. to use this method in 2012. Last week, the AP reported that "officials in Connecticut, South Carolina and Colorado announced new public/private arrangements to fund so-called 'pay for success' projects that aim to help families struggling with drug addiction, improve health outcomes for poor mothers and their children and reduce chronic homelessness."

"It's critically important in this time, when, as our governor has said many times, we're facing a new reality - a new reality of budget restrictions, but the same if not growing challenges in our communities and the need to invest even more," said Hartford, Connecticut Mayor Luke Bronin, at Tuesday's announcement of the "Connecticut Family Stability Pay for Success Project."

The 4.5-year, $11.5-million initiative will fund teams of two clinicians and a family support worker who will make in-home visits several times each week to families struggling with drug abuse, as reported by the AP. 

"Social Finance, a Boston-based, nonprofit organization, will raise the money needed for the initiative. The group's sister organization, Social Finance UK, was founded in 2007 and launched the first social impact bond in 2010. The U.S. program was founded in 2011 and has been identifying programs that can help fix social problems." If the program meets its goals, the backers get their principal back with modest interest. If the program fails, Social Finance investors pick up that tab.

"Government wins, because they only pay for results. Investors win, because they get their money back and achieve a financial return and social impact. And nonprofits see it as a way to get capital to expand services," said Tracy Palandjian, co-founder and CEO of Social Finance U.S., which developed and raised capital for the South Carolina project.

Thinking outside the traditional funding model is the only way the larger issues facing all of us can be tackled. We cannot look to the government to provide everything - the issues are too big and the funds are just not available (or tied up elsewhere). Something to consider as Arizona faces its own social issues.

- Robin Layton, editor

Follow Robin Layton on Twitter @RobinLaytonAZ. Reach her at 928-445-3333 ext. 1095, rlayton@prescottaz.com.