Community Development Innovation Review

April 2013

The Promise of Pay for Success


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.

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Other articles in this issue

Community Reinvestment Act (CRA) Banks as Pioneer Investors in Pay for Success Financing

The Real Revolution of Pay for Success: Ending 40 Years of Stagnant Results for Communities

Pay for Success is Not a Panacea

Social Impact Bonds: Lessons Learned So Far

Pay for Success: Understanding the Risk Trade-offs

The Ethics of Pay for Success

Learning from the Low Income Housing Tax Credit: Building a New Social Investment Model

Using Social Impact Bonds to Spur Innovation, Knowledge Building, and Accountability

Social Impact Bonds: Using Impact Investment to Expand Effective Social Programs

Innovation Needs Foundation Support: The Case of Social Impact Bonds

Pay for Success: Opportunities and Risks for Nonprofits

Success Begins with a Feasibility Study

Government’s Role in Pay for Success

Rikers Island: The First Social Impact Bond in the United States

Human Capital Performance Bonds

Pay for Success: Building On 25 Years of Experience with the Low Income Housing Tax Credit

Can Pay for Success Reduce Asthma Emergencies and Reset a Broken Health Care System?

Supporting At-Risk Youth: A Provider’s Perspective on Pay for Success

Tax Increment Finance: A Success-Driven Tool for Catalyzing Economic Development and Social Transformation

Bringing Success to Scale: Pay for Success and Housing Homeless Individuals in Massachusetts

Making Performance-Based Contracting Work for Kids and Families