The Promise of Pay for Success

Author(s): Jonathan Greenblatt, White House Office of Social Innovation and Civic Participation and Annie Donovan, White House Council on Environmental Quality

The president’s fiscal year 2014 budget demonstrates that we can make critical investments to strengthen the middle class, create jobs, and grow the economy while continuing to reduce the deficit in a balanced way. Pay for Success (PFS) fits squarely in this strategy. The Obama administration is fostering a PFS market using all the tools at our disposal: policy development, budget proposals, pilot programs, and open dialogue with innovators from across government and the private sector to share knowledge and best practices. These strategically designed programs are meant to encourage both smarter government and the development of a robust capital market for PFS. In the fiscal year 2014 budget, President Obama is accelerating his commitment to PFS by nearly doubling the fiscal year 2013 commitment with more pilots across the federal government. But more importantly, he is proposing the creation of a new, $300 million PFS Incentive Fund, a breakthrough initiative that is designed to spark systemic change across government at all levels. The program will empower cities and states by helping to spread evidence-based innovation throughout the country. It will facilitate new resources to nonprofits that need support to scale up interventions that work. Finally, it will incentivize private investment in PFS financings by creating a mechanism to reward federal savings, unlocking new capital for communities. In addition to the Incentive Fund, another $185 million is proposed to support nine new PFS pilots in four agencies.