Giving Compass' Take:

• Pay for success legislation was passed in the most recent budget bill. This policy structure allows the government to pay investors for results related to specific government goals. 

• How should these policies be structured for the best results? What are potential drawbacks and problems with this method? 

• Learn about the merits of pay for success programs. 

For most state and local governments, the to-do list is long, and funding is short. But new legislation could unlock substantial new funding for social, health, and environmental programs. The Social Impact Partnerships to Pay for Results Act (SIPPRA) legislation, years in the making, was finally passed as part of the February budget. It appropriates $100 million to a Treasury-controlled fund, which will, for the first time, allow the federal government to repay investors in a Pay for Success transaction for outcomes.

Pay for Success, also commonly referred to as Social Impact Bonds, uses capital from impact investors to scale effective programs. In a PFS transaction, a third party — often a government — repays investors only upon the validated achievement of pre-defined outcomes. Because investors assume the risk if the project does not work, PFS enables governments to try innovative, out-of-the-box solutions.

At the same time, paying for outcomes requires rigorous measurement of impact, which helps develop effective, evidence-based policies and practices. Currently, less than $1 out of every $100 spent on programs by governments is rooted in evidence, increasing the likelihood that ineffective programs are being funded and effective programs are being underfunded.

Read the full article about pay for success by Brendan O’Connor at Medium.