Editorial: Creative financing plan links private money with public service (Ventura County Star)

Ventura County government has quietly joined a brave new world of government financing. The county has signed off on a program that will use private money to pay for a program to reduce recidivism. If the program succeeds, the private investors will get their money back (plus interest), and taxpayers will pay the bill.

This is the Pay for Success financing model that was launched in the United Kingdom six years ago and has moved to the United States, mostly under the umbrella of the nonprofit Social Finance group.

The state Legislature kicked off the idea in 2014 by creating the Social Innovation Financing Program and kicking in $5 million to pay for grants to three counties interested in creating programs to reduce recidivism. Ventura County joined Los Angeles and Alameda counties as the three successful grant applicants for the initial pool of money.

The state grant would pay half of the $3 million cost of a successful program here. The county has set aside its $1.5 million share.

In all likelihood, Ventura was selected because it is building off a similar, successful program called Core Connection being run by Interface Children & Family Services. That program, started in 2014, takes people released as a result of AB 109, the Public Safety Realignment Act designed to reduce prison overcrowding, and provides a specific program and training to help them re-enter our communities.

In the first year, the program provided services to more than 430 clients. That group was compared with a similar-size group who received the traditional post-release support and community supervision. The Core Connection clients showed a 27 percent improvement in recidivism and 87 percent improvement in probation violations.

So the program works. And now they want to expand it to probationers not covered by AB 109.

The innovation this time comes in how they are going to fund it.

The county will work with Social Finance as the intermediary. That national organization will contract with Interface for the services, and then go out and find investors to take the risk of funding the program upfront.

The plan is to serve 400 people. A similar-size group will not receive the intense support provided through the Interface program. If the probationers in the program commit 10 percent fewer new crimes than those in the control group, then the program will be deemed a success. Investors will get their money back, plus 10 percent interest, and the county and state will end up paying the bill from the money they set aside in a trust fund for this purpose.

This foray into private financing of public services is a unique and creative step toward a future where we find different ways of paying for government.

We are not opposed to the venture. But we admit to being somewhat nervous.

For us, a key element is in the clear separation of the investor from the service provider. What we worry about is not so much this program, but future efforts where an investor could step up to pay for a government program but include stipulations that its product or idea must be used.

The state grant program and Ventura County both appear to have robust and independent systems in place to determine success and failure, and to insulate the program from potential conflicts of interest. But we encourage the county to be sure to impose rigorous review of all aspects of this pilot effort before launching any new ventures.

We are excited about this brave new world. We just want to be sure the outcome is different from the one envisioned by Aldous Huxley.