Nonprofit investigates corporate investment for social programs
The Institute for Child Success is investigating a new funding model for social programs called Pay for Success. The model features investors putting up capital to expand social programs and receiving a dividend if the programs succeed. Seven projects worldwide have been completed under the model, only two in the U.S., including one in New York City for a prison recidivism program with funding from Goldman Sachs.
The Institute for Child Success, a statewide nonprofit based in Greenville, recently commissioned a feasibility study to see if such a funding model would work in South Carolina and presented the findings last week in Greenville and Columbia.
Funding through corporate and other investors is a way to spread successful programs, said Joe Waters, vice president of the ICS. “Government is stretched thin,” he said, and funds are not available to expand programs. “The cost is immediate and the benefits are long-term and diffuse.”
Megan Golden, a fellow with New York University, spent six months studying whether the state’s Nurse-Family Partnership could benefit from the funding model. The program has 33 nurse visitors statewide who work with mothers from pregnancy through their child’s second birthday to ensure healthy babies, school readiness, maternal self-sufficiency and more.
Golden explained that the investors, not the government, participating in a Pay for Success “deal” provide the capital to help expand a social program that has a proven track record of success. A nonprofit delivers the program, and as part of the agreement the government pays the investors back in a few years with evidence of a certain level of improvement. The money that the government pays back is realized in savings, said Golden.
With the Nurse-Family Partnership, an investment of about $21 million over three years would add an additional 2,750 families over that time period, said Golden. South Carolina is working to reduce the rate of pre-term births and the NFP predicts it can reduce them by 21 percent with such an expansion.
Cristina Shapiro, part of the urban investment group of Goldman Sachs, said the investors see the deal like any other loan, investigating the risk. Goldman Sachs, with secondary investment by the Pritzker Family Foundation, invested $4.6 million in a high-quality preschool program in Utah. The funds were administered by the local United Way and the school district provided the program, said Shapiro. “The investor only gets paid if the government realizes savings,” she added. The success was measured based on how many children needed special education services, she said.
Investors are interested in programs that can be successfully replicated and scaled up, said Jeff Schoenberg of the Pritzker Family Foundation. “We want to be catalysts for replication,” he said.
The Institute for Child Success will continue to investigate whether the model will work in South Carolina, said Waters.
